$MSFT up a quiet 4.5% this month so far, and 10% last month.
If it reclaims the 8-year trend line and 21 EMA weekly, after bouncing off the 200EMA weekly things start to look rotational.
๐จ It's currently trading at a 25 PE. If MSFT trades up to its average PE ratio of 35, its price will be hovering around $593. Data courtesy of @AlphaScopTrade
I can't stress enough how important stock picking vs broad investing is this year. This will be a bit lengthy but worth the read if you care about your money.
When dispersion hits the 99th percentile like it has now, the S&P 500 looks like a calm lake on the surface (flat returns near all time highs), but underneath, individual stocks are moving violently. This happens when the indices become top heavy, where a handful of stocks make up the index.
In normal economies and markets, this dispersion is healthy as the market is simply rebalancing or taking a breather. This leads to what is sometimes called a "rolling correction". The laggards eventually catch up.
In uncertain, volatile times, this signal is like a canary in the coal mine. The "ascending" stocks eventually roll over too. So which is it?
Currently, market breadth looks OK:
- Stocks Above 50-Day MA: 68.6%
- Stocks Above 200-Day MA: 67.0%
When more than two-thirds of the index is in an uptrend while the index itself is flat, it means the heavyweights (NVDA, MSFT, etc.) are consolidating while the average stock is participating.
โ ๏ธ The Danger Zone: If the tech leaders (who make up ~30% of the index) drop another 10-15%, it becomes mathematically impossible for the "small" stocks to rally hard enough to save the index. Thatโs when the flush happens.
And that's why in this high-dispersion environment, stock picking beats broad indexing. Quality names like $MSFT at 22x forward P/E offer a massive margin of safety. If the laggards catch up, you capture outsized gains. If they donโt, youโve secured a quality floor at a discount. Buying the index here is just buying the danger zone.
Not financial advice. Do what you will.