A stronger close would have been better, but the action today was a good example of the sort of follow-through we have been missing since February. The bulls put together two solid days of gains and it probably was better that many market players felt the French election was not a legitimate reason for such a big move. The move wasn't justified on that news, but the pricing action is telling us the path of least resistance was up and that sooner or later there would be a good excuse for the buying.
What helped today were the very strong earnings reports from some stodgy DJIA stocks like McDonald's (MCD) and DuPont (DD) . They acted like FANG names and that is what really helped to improve the tone of trading.
It was particularly interesting that the momentum was in higher-price stocks that tend to trade with lower levels of volatility. It wasn't the high-beta technology names that were leading and it wasn't the small-cap speculative stuff either. It was boring industrial names, and that is probably the best sort of leadership.
Can the market keep on running from here? The indices are a bit overbought and entry points are more difficult but, as I wrote in my previous post, it is a mistake to underestimate the power of momentum. Strong markets tend to stay sticky to the upside as big moves create underlying support.
The primary challenge of this market is finding the right vehicles. The bulls have managed to regain control of the trend, but you need to be in the right stocks to benefit from this action. Stock picking isn't easy as a new crop of names seems to be leading now.
Moves like this always generate folks who are anxious to call a top. It is understandable as it can seem quite frothy with emotions running high, but it has been a terrible approach to fight strong price action. Momentum always seems to last longer than seems reasonable.
Work on finding some good stock picks and enjoy the momentum while you can. The bears are fighting it but the fear of being left out is more powerful than any other worries right now.
Have a good evening. I'll see you tomorrow.