We have a good example this morning of how computer algorithms have affected the market. Typically, a tragic event like the terrorist attack in Manchester, England, would cause a negative market reaction as it creates some degree of economic uncertainty.
A weak open and then some recovery as the market adjusts its opinion would be a normal reaction, but in the current market everyone knows a dip will be bought. It doesn't much matter what the news might be. The dip buying is a certainty. In fact, traders are often rooting for an opening dip so they can put money to work.
The potential for dip buying was so obvious that it didn't even occur at the open. Instead, the indices opened at the highs. The dip-buying play was so anticipated that it never had a chance to occur. Now market players are trying to figure out what to do next. They still want to buy a dip and they have the indices off the early lows, but there isn't any notable upside momentum. Breadth is running slightly flat, but there are 350 or so stocks at 12-month highs. Underlying support remains strong, although the pockets of momentum have dried up.
I feel pretty good where I am, with a few positions and a high level of cash. I'm not bearish and am not pursuing any index shorts, but I'm not seeing much that I can aggressively buy right now. There are some names like The Trade Desk (TTD) , GlycoMimetics (GLYC) and Applied Optoelectronics (AAOI) , but I'm in no rush to build them. I started a new position this morning in TG Therapeutics (TGTX) but am keeping initial positions small.
