After two days of gains we are seeing some routine consolidation in the indices today. The pause is being aided by some weakness in Apple (AAPL) and some of its suppliers that are undergoing a little 'sell the news' action, but it is pretty mild overall.
Breadth has moved from slightly negative this morning to around 3400-3150 positive and the new 12-month highs have jumped up to over 300.
The action is a good example of what happens when a large number of market players are caught out of position, which is what happened on Monday morning. When the market doesn't immediately pull back, the underinvested bulls keep inching in as they are afraid of being left out. It is 'wall of worry' action. The worry in this case isn't a news event but concern that the market may not fade.
Trading momentum at this point is extremely difficult. On one hand there are stocks like an old favorite, Tabula Rasa HealthCare (TRHC) . I wrote about this for many months and it didn't do much. Suddenly it broke out and made a huge move in August. I sold down my position to a token amount, but today it is up nearly 8% as it breaks out of a bull flag. Obviously there are some buyers happy to chase it here but I can't bring myself to pay up at this point.
Another stock I've mentioned quite a bit in recent months is The Trade Desk (TTD) . It failed to gain momentum after a couple great earnings reports but it suddenly came to life a couple weeks ago and broke out to a new all time high. That stock is reversing today although it is no more extended that TRHC.
There is no way to logically determine if a stock will be chased like TRHC or will reverse like TTD. Both have solid fundamentals and good charts but in this market you have to be willing to roll the dice when chasing extended stocks.