Upside Yes, Thin Participation Yes

by | May 1, 2023

To sum up earnings so far,, we’ve seen some headline grabbers from the good (tech giants) to the bad (regional banks).

From a broad perspective it’s a mixed bag, but the main indices are influenced heavily by the biggest stocks. Just look at the SPDR Dow Jones Industrial Average ETF Trust (DIA), SPDR S&P 500 ETF Trust (SPY),and Invesco QQQ Trust (QQQ), and then compare them with the iShares Russell 2000 ETF (IWM).

It’s easy to see the contrast between large caps and the rest.

This could be a case of new leadership, which hauls the markets into bright new horizons, or it could be a sign of limited short-term upside (my hunch). 

That said, high quality individual stock setups are always worth considering.

As I go through my regular process, I still see the large caps having more upside potential, but I prefer not to chase the ones that have gapped up and gone parabolic … even though last week that might have been fruitful!

Typically the parabolic party only lasts for a limited time.

I expect more short term upside is likely for the leaders, and earnings will have a big say. But it’s interesting to see that so far, pre-earnings bullishness is not being matched by post earnings performance.

Guy Cohen

WRITTEN BY<br>Guy Cohen

Guy Cohen

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