It is starting to look like a replay of yesterday's action. The market sells off in the morning, which excites the bears, but then bounces back and goes straight up. Yesterday we ran straight up into the close, so it will be interesting to see if there is enough buying power to do it again.
Breadth is still running solidly negative -- at around 2 to 1 -- with the iShares Russell 2000 ETF (IWM) lagging badly, but biotechnology bounced back from the Trump beating yesterday, and that is helping a bit. I suspect that some optimism about the earnings reports tomorrow from Wells Fargo (WFC) , Bank of America (BAC) and JPMorgan Chase (JPM) is helping to keep some bids under the market.
I'm positioned quite defensively and am rooting for some deeper pullbacks so I can add to names I like. For example, Ultra Clean Holdings (UCTT) is one I'd like to add, but it is hitting new highs today. New highs are down to around 200, but there are still a few things that have momentum.
We are so used to the market quickly bouncing back from dips that there is a strong inclination to rush in and buy the slightest weakness. It hasn't made sense to bet on downside momentum. It simply hasn't existed for a while, but that means we need to be very vigilant and watch for the potential of failed bounces. The key is the last hour of trading. Yesterday we went out very strong, but a weak close today will give the bears more confidence that the market is undergoing a significant change in confidence.
Downside action is what gives us a new supply of opportunities, so there should be no reason to fear it if you are managing your positions correctly. With earnings season coming up there are sure to be some new stock picks of interest.