Sharp losses in high-flying momentum stocks may present a dip-buying opportunity if history is any guide, says Goldman's trading desk https://t.co/vmPjuedMql ...

Core Viewpoint - The article emphasizes the importance of investing in high-quality growth and momentum stocks that are reasonably priced, with a focus on long-term performance and market outperformance [1]. Group 1: Investment Strategy - The investment strategy involves focusing on growth and momentum stocks that are expected to outperform the market over the long term [1]. - The analyst has a history of advising investors to buy at market lows, specifically mentioning a recommendation in March 2009 during the financial crisis, which led to significant market gains [1]. Group 2: Market Performance - From 2009 to 2019, the S&P 500 increased by 367%, while the Nasdaq saw an increase of 685%, highlighting the potential for substantial returns in the growth stock sector [1]. Group 3: Investment Philosophy - The analyst aims to assist investors in making money through investments in high-quality growth stocks, indicating a commitment to long-term value creation [1].

Group 1: Market Overview - Stocks are mixed this week due to trade policy developments, the start of earnings season, and speculation regarding Fed Chair Jerome Powell's future [1][2] - President Trump announced a $550 billion investment deal with Japan, with the US imposing a 15% tariff on Japanese goods [1] - Treasury Secretary Scott Bessent indicated that several trade deals are expected to be signed soon, with flexibility on the August deadline for larger deals like the EU [2] Group 2: Momentum Stocks and Market Sentiment - Signs of market frothiness are emerging as heavily shorted retail stocks rally, indicating potential overheating [3] - Notable examples include OpenDoor Technologies, which surged by 500% this month, along with other heavily shorted stocks like Krispy Kreme and Beyond Meat experiencing relief rallies [3] - The prevalence of "0DTE" options, accounting for about two-thirds of daily options volume, suggests retail investors may be exhibiting "irrational exuberance" [4] Group 3: Historical Trends and Seasonality - The S&P 500 Index has remained above its 20-day moving average for approximately two months, historically leading to profit-taking [8] - Historical data shows that after similar trends, the S&P 500 typically experiences declines in the following days [9] - Seasonality trends indicate that the S&P 500 has been strong in the first half of July but tends to pare gains in the latter half of the month [8]

Core Viewpoint - The semiconductor sector, particularly the Semiconductors Sector ETF (SMH), has shown significant price movements, with potential for both profit-taking and corrections in the near term [5][6]. Semiconductor Sector - The semiconductor companies, including notable names like Nvidia (NVDA) and Broadcom, have recently reached new all-time highs, indicating strong momentum in the sector [2]. - SMH rallied above its January 6-month calendar range in June but faced resistance in July, suggesting a critical point for future price movements [7]. - Current momentum in SMH remains strong but has not reached new all-time highs alongside price, indicating a potential divergence [7]. Russell 2000 ETF - The Russell 2000 ETF (IWM) attempted to clear the July 6-month calendar range but was unsuccessful, mirroring some characteristics of SMH [9]. - IWM's performance in early July showed improvement, but it has not yet cleared significant resistance levels, which could impact future rallies [12]. - A convincing breakout above the 226-227 range for IWM could signal a strong upward trend, contingent on the retail sector (XRT) also rallying [10].

Market Sentiment & Valuation - The market is assessing whether the recent pause is a temporary consolidation or a midsummer stall, similar to the previous year [1] - Some stocks have already priced in positive scenarios like tariff resolutions, interest rate cuts, and AI-driven economic growth, making them vulnerable during earnings season if results are not perfect [3] - Many relatively valued or inexpensive stocks, particularly in cyclical sectors, are pricing in a more bearish outlook and could potentially rally [4] - Overcrowding in momentum stocks requires continuous positive data to sustain their upward trajectory; otherwise, they are susceptible to a self-reinforcing downward cycle due to market leverage [10] - A shift from growth to value and from large-cap to small-cap stocks indicates the market is rebalancing to avoid excessive imbalances [8] Interest Rates & Economic Outlook - Speculation surrounds the Federal Reserve's actions and the necessity of rate cuts, influenced by global announcements such as Canada's interest rate adjustments [5] - Concerns exist that if interest rate relief does not materialize, a correction could occur across all cyclical stocks, regardless of their valuation [6] - The market anticipates Canada's interest rate to be 15%-25% higher [5][6] - The most probable cyclical outlook is one of steady performance, leading to a divergence in performance between expensive and reasonably priced cyclical stocks [7] Cyclical Stocks & Sector Performance - Certain industrial areas, especially within transports, exhibit trough multiples on earnings that have remained relatively stable, but are not at peak levels, anticipating a significant recovery [6] - A major cyclical rebound is unlikely due to the potential for the 10-year Treasury yield to rise, creating a counteracting force that prevents the cycle from becoming too strong [7]

Group 1: Momentum Stocks Overview - Momentum stocks are characterized by rapid upward trends compared to the market, driven by innovation, psychology, and market momentum [1] - Retail traders can capitalize on these stocks through chart reading and risk management, particularly in short-to-intermediate time frames [1] Group 2: Rigetti Computing - Rigetti Computing (RGTI) aims to build powerful quantum computers and has a current revenue of just over $1 million, projected to grow to $37.65 million next year [2] - Zacks Consensus Estimates indicate year-over-year growth of 159.30% for the next year, with current quarter estimates at $3.16 million [3] - RGTI has secured several government contracts, including one with DARPA, and is breaking out of a long base structure [3] Group 3: SoundHoundAI - SoundHoundAI (SOUN) is a leader in AI voice solutions and has a partnership with Nvidia, distinguishing it from slower-moving mega-cap tech stocks [7] Group 4: Carvana - Carvana (CVNA) was near bankruptcy in late 2022 but has since secured financing and transformed its fundamentals, with shares rising from single digits to over $300 [9][10] - The stock is currently breaking out and holds a Zacks Rank 2 (Buy) rating [10] Group 5: Market Opportunities - The current market environment presents significant opportunities in quantum computing and AI stocks for nimble traders seeking super performance [11]