Strong markets tend to stay sticky to the upside and that is what we are seeing this morning despite overbought conditions in a thin market. There is some optimism about a trade deal with Canada but no major news events are driving the action right now.
The attitude among many traders is that the market needs a rest but there is no big rush for the exits. In fact the dip buyers were busy in the early going. Breadth was around 2 to 1 negative but has improved a bit. The number of new highs has shrunk to 180 as there is hesitancy to chase the market here.
I continue to see some good action in the biotechnology sector. Sangamo Therapeutics (SGMO) , which I discussed yesterday, continues to run up into news next week. Amyris (AMRS) , which we did write on a few weeks ago, is up on news that its zero calorie sweetener, made form sugar cane, has been granted approval for commercial sales. This company should be very interesting in the next two quarters.
Salesforce.com (CRM) announced earnings last night and is trading down despite at least eight target increases. It has bounced off its early lows and I expect to see very strong support around $150. This remains a 'go to' name for big cap momentum players and I expect it to regain its footing quickly and challenge highs again soon. It is a name that many funds will want to own into earnings next quarter.
Software accounting has some peculiarities, so the main focus is on the revenue growth of 25% which has been quite steady. There is no slow down there and that is the key.
I'm hoping that the market can rest a bit more and setup some better entry points. A pullback here is what is needed. Ignore the bears that want you to believe that any selling is the start of a major top.