We have some continued momentum in the early going on good breadth of nearly 2 to 1 positive, but there are some signs of increased instability. The indices are off their early highs and breadth has faded.
At the moment, all eyes are focused on the drama in shippers. There have been absolutely insane movements in the group, but it is falling to pieces now that Dryships (DRYS) is reopened. The stock has been in a freefall and has already been halted twice for volatility. Management put the nail in the coffin by announcing a huge secondary offering.
There never was any good fundamental reason for the move in shippers, and now the flippers and momentum players that were caught are trying to get out as quickly as they can. We haven't had sector action like this since 2000, and you have to wonder what it says about the market. This is the sort of euphoria that contrarians can be excited about.
Despite the drama in shippers, we continue to have good action in a number of stocks I've been discussing lately -- such as Advanced Micro Devices (AMD) , NVIDIA (NVDA) , Oclaro (OCLR) and other small-cap technology names. My Stock of the Week, Twilio (TWLO) , is taking a rest, but I'll be looking for more entries there.
The traders that were playing the shippers are going to be looking for other sector plays now. At the moment the chips seem to offer the best setups. There are also some oil plays, like Pacific Drilling (PACD) and Resolute Energy (REN) , on the radar. Precious metals have been showing some bounce, but it is limited.
I'm watching for intraday reversals in the indices. The shippers obviously had a huge blow-off top and, while it is just a minor sector, I suspect it is reflective of the general mood of the market. Folks have been chasing and ignoring risk and now they are seeing what can happen.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider DRYS to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.