After great action on Thursday, stocks are mixed today. Breadth is running 3000 gainers to 4650 decliners, but new highs are still robust at over 900. The pockets of momentum have slowed substantially within a much shorter list of stocks moving up more than 10%. Speculation in the bitcoin group has slowed, and there aren't any strong themes working right now.
This sort of pause after a strong move is generally healthy. Stocks need to consolidate to build a foundation for higher prices, but what is different this time is that the action is so sensitive to higher interest rates. Aggressive traders want to ignore the bond market and interest rates, but the correlation between the 10-year bond and the indices is extremely strong right now.
There is concern that a continued rise in interest rate is going to prevent sustained momentum from building. The irony is that the stronger the economy, the better it is for earnings, but more likely it will pressure multiples as interest rates rise.
The dilemma for traders is that the sensitivity to interest rates is undermining the confidence in good chart setups and positive price action. After the strength yesterday, there would tend to be very strong underlying strength, but the S&P 500 is now testing the lows of the day as bonds continue to sink.
This battle between interest rates and momentum in stocks is going to continue for a while. Recently, hedge fund manager David Tepper expressed a bullish thesis based on the logic that higher bond yields would attract foreign buyers, and that would cap some of the upward pressure. There are some signs of that scenario, but stocks are nervous about interest rates and making trading more difficult.
I've been a buyer of a few names this morning, like Comstock Resources (CRK) , Century Casinos (CNTY) , AMMO (POWW) , Seelos (SEEL) , CurrencyWorks (CWRK) , Mogo (MOGO) , Golden Nugget Online Gaming (GNOG) , and several others. Mogo Finance Technology is a sympathy play on bitcoin and looks particularly interesting on a rebound in Grayscale Bitcoin Trust (GBTC) next week.