What has been missing in this market since the first two day of June is momentum. Today, the S&P 500 is working on its best two-day move in over a month. The move isn't even 1%, but it is nice to see some follow-through rather than a quick reversal.
It looks like there is limited confidence in this market, which is probably what is keeping it running at this point. There is some hesitation to chase, but when things don't pull back, the buyers start to inch back in due to fear of being left behind.
The main thing that is helping is strength in financials as well as better action in the FAANG names. Small-caps were lagging early but surged as small banks started acting better. Breadth is still a bit soft with about 3,800 gainers to 2,900 losers and there are only 150 new highs, which tells us momentum has been lacking recently.
One thing that is probably helping the tone of the action is the anticipation of earnings season. There are some big banks on Friday and then next week there are some big names like Goldman Sachs (GS) , Netflix (NFLX) and Microsoft (MSFT) , but it's the week after that when most key names begin to report.
Earnings have been kind to this market in recent years and it will be tough to be too bearish into reports. I'll be looking at a number of stocks that had good reports last quarter but have not made any progress since then. One example on my radar is The Trade Desk (TTD) , which is trading close to where it was after the stock gapped up on a good report. Stocks like this can make a good anticipatory move into reports and I'll be looking for others that have made little progress after a strong reaction to good numbers.
The key to this market is staying in the key sector. Retail is being pounded and biotechnology is struggling but technology is looking better and banks are seeing bids. I'm taking some SPDR Select Sector Financial ETF (XLF) into the bank earnings reports on Friday.