By Daniel Betancourt/ OptionsSwing Inc August (18th), 2020
An incredible rally from the March lows has left the market in awe…
There were those that doubted and there were those that rode it. A 55% drop led by a +55% recovery all within the span of six months. A V-Shape recovery is what President Trump called it back in April and that is exactly what it has been. Something the market has never seen before in such a short period.
What is the driving force behind this locomotive?
The strength of tech has been something that many call “very similar to the 2008 tech bubble”; but it seems as though this bubble is made of iron and refuses to deflate. Tech giants are trading anywhere from 50%-200% higher than pre-Covid prices: AMZN, TSLA, AAPL, SHOP and etc.
The way we stay in a bull market is this sector rotation that bulls have created. Almost seems as if tho institutions send a chain text to each other saying “Alright boys, today we pump the NASDAQ and on Thursday we move to the DJIA”. These sector rotations cause massive bear traps as money is being moved around to pull up all the indices in a healthy manner; pump it, let it cool off/sell off for a bit, move money to different sector, pump it, let it cool off/ sell off for a bit…rinse and repeat. The confidence behind these bulls comes from their guarantee from the Federal Reserve and Treasury that their money is in a safe place. Jerome Powell and Mnuchin will do anything in their power to keep the stock market well above its fair-value and have warned bears not to “bet against America”.