The indices have been doing a good job of holding on to early gains so far, but there is limited chasing and few signs that FOMO (Fear Of Missing Out) is kicking in.
Breadth has come in a little but is still quite robust at better than 2-to-1 positive. The list of 5% movers has expanded as has the number of stocks at new 12-month highs.
It is a decent bounce but the big question is whether it can generate some positive follow through.
Before the Turkey generated selloff of the last couple days the most notable characteristic of the market had been its choppy and inconsistent action. Rotation has helped the indices to stay near highs, but there has not been strong momentum or leadership. The hot groups have changed on almost daily basis.
I expect that the slow action of the last couple weeks of August and the poor seasonality of September will keep the market in a choppy trading range.
The good news is that the market still won't embrace a negative narrative for long and there always is the potential for a positive headline on trade or the economy.
On Twitter this morning Tony Dwyer commented that "According to NFIB, Small Biz Optimism Index hit 107.9 in July, which is just 0.1% from record reading in 1983. There is no way to spin this as negative since data started (1974), we found NFIB Index peak leads recession by median 41 months" In other words, business optimism is booming and when it is this positive the likelihood of a recession in the near term is very small.
The stock market doesn't always correlate with the economy but it is hard to develop a 'topping' thesis when the economic trend is so solid.
I haven't been doing too much new buying today but one stock I mentioned last week as a biotechnology favorite, Sarepta (SRPT) pulled back and filled an upside gap that was created on its earnings report. The stock also had a new buy recommendation today. I have been adding shares and expect a positive catalyst next month when a clinic hold due to a manufacturing issue is lifted.