For the past couple of weeks most of the market excitement has been in the individual stocks rather than in the indices. It has been a very good environment for stock pickers as seasonality, the bitcoin frenzy and small cap outperformance have combined to create some great trading action.
The speculative stock picking is slowing a bit today as the indices outperform. Breadth is still quite positive with about two gainers for each loser but the number of new 12-month highs has dropped below 300 and the pockets of momentum have dried up. I see only a handful of stocks that are up more than 10% today compared to dozens in recent sessions.
The indices are still fine but as I've mentioned a number of times lately, I am on guard for a bout of selling at the end of the year. Many traders, including me, like the idea of starting with limited inventory in the new year. There will also be tax and positioning moves that can cause unusual movement. We haven't seen much of it but I believe it is a very strong likelihood.
I'm doing some trading today in names that look like they may be ready to bounce back from tax selling.
A good example is Gridsum Holding (GSUM) which IPO'd at $13 back in 2016 and now is trading around $9. Despite having some of the right buzzwords like artificial intelligence, it has struggled but it hammered on good news today which may be a sign it is washed out.
Many tax plays will be developing in the weeks ahead. One very under the radar play I'll be watching is Hexindai (HX) , a China-based business lender that was unfairly caught in the controversy over on-line consumer loans in China. It is very thinly traded but with revenue growth of 300% I think it will be eventually discovered.