I have been saying it all week, but today was another good example of how this market is all about stock picking rather than market timing. The indices acted on the poor side with some mild losses and an intraday reversal to the downside, but there continued to be a large number of stocks with very strong momentum.
Breadth ran negative with about 3,100 gainers to 3,550 decliners, but we had another 460 new highs. Names like Acacia (ACIA) , Nvidia (NVDA) and Hain Celestial (HAIN) were gunned higher as the hot-money traders searched for action. The optical sector was red hot and biotechnology also did well.
This market is a lot like the parable about blind men describing an elephant. It really depends what part of it you are looking at. If you are focused on the technical pattern of the S&P 500 ETF (SPY) or the iShares Russell 2000 ETF (IWM) , it looks much different than what is going on with some individual names.
Typically, when there are some red-hot pockets of momentum, bears view them as a contrary indicator. Obviously this sort of action is causing some strong emotions in those who are involved in the right names, but does that mean we are on the brink of disaster?
Momentum can last longer and go much further than you think is reasonable, but even if there is a turn on the horizon you can control risk with good money management. It may feel a bit frothy in places and it is the dog days of summer, but staying with the right stocks is working.
Have a great weekend. I'll see you on Monday.