If you look at the S&P 500 or the Nasdaq 100 ETF, it looks like another solid day of gains for the market. The indices are hitting all-time highs after six straight days of gains. It is hard to be negative when there is momentum like that, but it was a bit misleading.
Under the surface, breadth was mixed and most of the heavy lifting was done by the small group of big-caps that have been outperforming all year. If you are holding just a few names like Alphabet (GOOGL) , Amazon (AMZN) and Tesla (TSLA) , you will be doing well, but the great bulk of the market is lagging these high fliers and so are most money managers. (Alphabet is part of TheStreet's Action Alerts PLUS portfolio.)
The action we have seen since the big selloff last week is what has driven many money managers nuts over the last few years. There is a V-shaped bounce, lower volume and poor breadth. That combination doesn't make for easy outperformance. The only way to keep pace is to hold just a few big positions in a small group of big-caps. If you haven't done that, you are most likely lagging.
Unfortunately for the bears, this sort of action isn't good reason to be bearish about the indices. Maybe there are some shorts in individual stocks, but the indices are in fine shape technically albeit a bit extended at this point.
For traders like me, the action was tedious today. There wasn't much momentum to be found and most stocks I was watching finished lower than they opened. After six straight days of gains for the indices, there simply aren't many setups left.
The tempting thing to do is to take a bearish posture, but just because you may have difficulty finding good longs doesn't mean you should take the inverse position. There are problems with this market action, but that doesn't mean a major reversal is imminent.
Have a good evening. I'll see you tomorrow.
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