For the third day in a row, breadth is negative but big-cap names keep the Nasdaq in the green. None of the other major indices was able to keep pace with the Nasdaq and this narrowing strength is causing some concerns. Strong markets see leadership expand, not contract like this one is doing.
The good news is that the merger action, with Ariad (ARIA) and VCA Antech (WOOF) selling for big premiums, helped produce some strong pockets of speculative action, especially in biotechnology. There were a good number of stocks today with moves of more than 10%, which helped soften the blow of continued weakness in small-caps.
Strong speculative action in names like Exact Sciences (EXAS) , Ultra Clean Holdings (UCTT) and Surgery Partners (SGRY) are offsetting some of the worries about the internal deterioration. While the buying may not be very broad, it is quite intense in places, which tells us market players are still quite positive. However, if the indices are going to advance, we need leadership to expand and for the pockets of momentum to develop in other sectors.
The S&P 500 and Russell 2000 ETF (IWM) closed near their lows of the day, but technical support is still solid. I'm not feeling very optimistic, but the price action is still sufficient to give the bulls the edge.
Have a good evening. I'll see you tomorrow.
