After some weak action to end 2016, market players were caught by surprise with a big gap-up open to start the new year. There was a little selling into the strength but then a very strong PMI report gave the bulls another reason to put money to work.
While there is a lot of grumbling among folks that are already lagging the market the longer the gap holds the more likely they will start finding some ways to get involved. Traders generally don't like to chase a gap-up open to start the week, not to mention the year, but they hate underperforming even more and are inclined to start buying when there isn't a quick reversal.
As I mentioned last week, I intended to start the 2017 with a very high level of cash and I know I'm not alone. Now I have to look for ways to put some of it to work.
Once group catching my eye is steel. The sector was pulling back after a big move since the election but the PMI number bodes well for this area. I have AK Steel Holding (AKS) at the top of my list but am also watching Mechel (MTL) and Steel Dynamics (STLD) .
Another group that is of interest is biotechnology. There was heavy pressure on many of the beaten-down names due to tax-loss selling but they are not starting to bounce some. One name Shark Biotech likes is Sarepta Therapeutics (SRPT) . Also on my radar is Aratana Therapuetics (PETX) , which is one of my top seven low priced stocks to watch in 2017.
I'm anxious to put some of this idle cash to work but I'm forcing myself to stay patient and see how well the strength holds. I suspect we are going to see some strong support and that performance anxiety will be quite high.