All the key indices are down, breadth is running around 2-to-1 negative and the number of new 12-month highs is down to under 120 - but there continues to be some pockets of very strong momentum. CLPS (CLPS) , IQIYI (IQ) , Sogou (SOGO) , Canada Goose (GOOS) and Dropbox (DBX) are a few of the names on my screen that are ignoring the overall market weakness.
The main thing that these names seem to have in common is that they're on trend-following momentum traders' radar screens. The only thing that seems to matter to the people who are trading these stocks is that the names are moving. Fundamentals are secondary, while overall market conditions don't seem to matter much, either.
The bears sometimes view this sort of speculative action as a contrary indicator, but it can last longer than many people think. The S&P 500 is taking out its intraday lows as I write this, and breadth has slipped a bit more. That could trigger some profit-taking in these high-flying momentum names -- but as we saw this morning, traders tend to come back to them very quickly.
Personally, I'm a net seller here. I've been closing out some of my big winners like SOGO, which was my Stock of the Week. I think the stock will set up nicely again in the future, but I'm happy to move to the sidelines for now.
The pockets of momentum have been unusually strong for a market in which the senior indices have been so dead. That can pay off nicely if you're fast and manage positions well, but keep in mind that momentum eventually cuts in both directions. The stocks that go up the fastest also come down the fastest.
