The indices are building on Friday's gains and breadth is running quite strong but there are quite a few of reversals from highs in the early going.
For example a number of China names that I mentioned last week quickly reversed after a strong start. IQIYI (IQ) , HUYA (HUYA) , MOMO (MOMO) and Bilibili (BILI) are a few examples. Also, there is pressure in the biotechnology sector that had been performing well into a big cancer meeting this past weekend.
An intraday reversal after a euphoric start is going to require some defensive action. I've cut some names already and will cut more if the weakness persists.
My primary thesis recently has been that this is a good market for stock pickers. When the stock picks stop working then its time to cut exposure and to be more selective when making new buys. Small caps are also lagging which is another reason to be concerned.
There is nothing wrong with the overall technical action, but the sharp reversals in some momentum names are very important to watch. It may just be a bout of profit taking after a good run but it is severe enough to increase our vigilance.
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The tech giant doesn't want to risk its big cloud computing and software business in China over censorship traps that its social media jobs site faces.
With constrained trade routes between the U.S. and China, I want to own a piece of whomever is steering or parking those big ships off the port of Los Angeles and elsewhere.
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