While the indices are flat to mixed the main focus of traders is on rotation. Today, the rotation is into steel, retail and regional banks and out of biotechnology and oil. The FANG names are on the plus side, which is helping the indices stay positive, but there is a little less momentum today, which is giving the market a more sedate feel.
Keep in mind that many traders are positioning themselves for some speculative trading around the holiday. They are looking for smaller-caps that can move big. If you are in the right names it can be self-fulfilling as strength attracts traders that will create more of a chase.
I'll be preparing a list of candidates tonight but a couple of examples I have on my screen already are Pixelworks (PXLW) , Skyline Medical (SKLN) and Fate Therapeutics (FATE) . All have big volume increases today and should attract some attention.
A reader asked if it was a good time to buy some "protection" as the market becomes increasingly extended.
My view is that the only real protection is cash. I'd rather sell a stock and hold cash than try to offset the possibility of losses with puts or some complex approach. I believe the best form of insurance is to sell a stock and then buy it back. You may pay a premium if you do this but that is the cost of doing business.
When I do take an index play, I don't do it with the goal of offsetting gains or losses in individual stocks. I want it to be a profitable trade rather than just attempt to hedge my risk.