The S&P 500 has had the exact same pattern three days in a row. It gaps down on negative news, sees immediate dip buying, closes strong but remains in negative territory. It is very odd consistency and I believe that it has not happened previously.
One slight difference on Tuesday was that the opening lows were breached about an hour after the open but the dip buyers went back to work quite quickly. Breadth was weak with about 2,800 advancers to 4,150 decliners but, most notably, new lows expanded to 200 and about matched the number of new 12-months highs.
Many of the super momentum stocks I have been highlighting recently finally cooled off, but the biotechnology sector stepped up and provided some strong action for traders. The leader was Sarepta Therapeutics (SRPT) but other names on my radar included Fate Therapeutics (FATE) , Coherus Biosciences (CHRS) , Arena Pharmaceuticals (ARNA) and Solid Biosciences (SLDB) .
This market continues to reward stock pickers, especially those that are buying the early dips, but the overall pattern in the indices is not at all clear. The bounces off the opening lows are obviously positive as are the strong closes but the inability to go positive is a problem. Dip buyers are doing a great job at the open but that momentum is fizzling out as buyers are uncertain and are faster to flip and lock in gains.
The most important thing right now is that the price action is still generally positive. It may lack the energy to go green but the underlying support is tenacious and that is the most important thing of all. The pockets of momentum that we continue to see are also helping to keep sentiment positive.
There are some problems but they are outweighed by the positives.