Early market action is soft, as the chatter about a market top grows louder. With earnings season over, a likely interest-rate hike next week and questions about the Trump's fiscal policies, the bears have some good arguments.
The problem for the pessimists has been that they have had good arguments for quite a while, but the price action refuses to cooperate. The bears always sound very astute, but until we start seeing some weakness, it is very costly to embrace their arguments.
This morning there was a gap lower to start the day, and so far just a limited try at a bounce. The pattern has been early weakness and afternoon strength. As long as that pattern continues, it is tough to be too worried about the technical action. What we have to watch for is a shift in that pattern. A number of weak closes in a short period of time would be a major worry. Last Thursday was a good example, but the market regained its footing on Friday.
Breadth is running very poor this morning, with about 1,500 gainers to 4850 losers. There is still some relative strength in small-cap biotechnology, but the Nasdaq 100 (Powershares QQQ Index (QQQ) is rolling over -- and that has to be watched carefully.
There are only 73 stocks hitting new 12-month highs today, which may be one of the lowest numbers since the rally began following the election.
Biotechnology names like Kite Pharma (KITE) and VBI Vaccines (VBIV) are doing well. I've been aggressive with some buys of Aurinia Pharmaceuticals (AUPH) , which had good news last week and is scheduled to present at a Cowen biotechnology conference this afternoon.
It has been tough to do much buying recently, with so many stocks extended, so I'm staying very selective and keeping stops tight.
The S&P 500 is hitting intraday lows as I write, which is not a good sign. I am going to play strong defense and will be very focused on the ability of the market to rally this afternoon.