It is understandable that market players have rushed to embrace some new themes following the Trump election, but has there been an overreaction and is it ready to reverse? The divergences in the market are downright stunning and we still have many months before new Trump policies, but should we automatically assume things are going to reverse back to where they were a week or so ago?
It would be nice if it was that easy, but the likelihood is that the themes that are developing are likely to continue. There are likely to be pauses rather than reversals. Biotechnology, for example, has gone straight up but has not broken out over the September lows. While the likelihood of a pullback is high, there is no reason to think the emerging trend is going to suddenly end.
If you have missed these moves, the best approach isn't to just write them off as a "miss" but to watch for consolidation and new support to develop. You may have missed buying at the lows, but that doesn't mean you have missed the trend.
There is a lot of stuff that needs a rest at this point, but these moves have a way of continuing longer than most people think is reasonable. The easiest way to get in trouble is to focus on what we think is reasonable rather than respect the fact that market dynamics don't have respect for general ideas of what constitutes "too much."
I've been a net seller today as I want to hang on to recent gains and am not seeing a lot of new entries starting up. I still like the looks of Tower Semiconductor (TSEM) and a few others, but I'm cutting back and waiting for the next round of setups.
Small-caps are up another 1.25% while big-cap technology is down another 0.8%. That can't go on too much longer but the unwind may not be as simple as it sounds.