An overbought stock market selling off on news of a government shutdown would seem logical, but the market doesn't operate on that sort of simple thinking. What drives this market are structural issues, not macroeconomic news events or political drama. The far more important consideration is momentum, big mergers in the biotechnology sector and the fact that there are so many skeptics that are battling this one-way action.
The way to think about this market is like a computer programmer focused primarily on psychology. What is the main dynamic that keeps this market running? It isn't news or valuation. It is the fear of missing out and trying to keep pace with the action. The fear is that stocks will continue to run up even though any reasonable person would agree that there are some very overbought conditions.
This price action functions in a way that we have no choice but to stay long if we want to make money. Think like a programmer not a critic.
I'm busy with quite a few trades in the biotechnology sector, which is seeing broad sympathy after two major mergers. On my list of movers are names I've mentioned a number of times, such as Sangamo Therapeutics (SGMO) , Sarepeta Therapeutics (SRPT) , Sorrento Therapeutics (SRNE) , Iovance Biotherapeutics (IOVA) .
My Stock of the Week, is a small-cap biotechnology name that should benefit from the same factors that are driving the takeover of Juno Therapeutics (JUNO) . HTG Molecular Diagnostics (HTGM) develops delivery mechanisms used to target tumors and diseases. After a secondary offering last week the stock looks like it is in good position to work higher.
I've been doing some selling into strength this morning. I still see plenty of stocks that are not extended. I'm still finding new buys and will be adding some things later in the day.