The drop in mid-January has been completely erased in a lot of names in February in dramatic fashion with some of these issues, like WDAY, NOW and OKTA essentially going up every day in February. Other “innovation” names like UBER, LYFT, SHOP, PYPL, FCEL, BLDP and BE were very strong and making new highs. The new highs in SPY and QQQ are quite a surprise from where we were at the end of January.
So was everything breaking out? Not quite.
The stalled names, like PLUG or TSLA are telling (as their valuations may be just too GME to sustain despite the uplift in the general market). But the nuance to that are the names that are actually weak. Of course MRK has been weak for a long time so setting that aside the price action in AMD, DASH and BYND is interesting. APD and ABB falling after earnings hints at what the real economy is doing. GRUB’s lack of traction in their earnings report may have affected DASH. BYND, after jumping dramatically on news of yet another partnership (this time with Pepsi), essentially gave up the entire gap up move as news of competitors cutting prices yet again brought reality back to this expensive stock. And that is the point: these innovation names can move dramatically up on their narrative and blue sky dreams but they can also fall due to reality, such as pricing pressures, competition or maybe the lack of a sustainable moat: basic stuff really.
So while some names like GME at the extreme and FCEL in a more slower moving and muted form, or BLNK in a valuation universe all its own, continue to rise on flow and momentum, there is the suggestion that the QE driven liquidity can easily flow elsewhere when returns in treasuries, for example, rival or even exceed the yields in equities. With treasuries rising, why not?
The fact that CHD, COST and PG are all trending down, and have been since August-December despite the rise in SPY is a most curious divergence. It may suggest flow is chasing momentum only and not looking at earnings or the underlying business. In other words, GME might not be exception but rather the summary of today’s market.
Felix qui nihil debet 