The indices are doing a nice job of holding above key breakout levels but traders are suffering some consternation as rotational action adds some complexity.
Breadth is running about 5 to 2 positive which is solid but the number of stocks hitting new 12-month highs is a meager 280 or so. This is not yet a market where there's chasing of hot momentum names. Some of the best action is coming in groups like banks (XLF) and semiconductors (SOXL) , but some of the traditional momentum names are mixed.
Many of the bulls have been playing strong defense and are struggling to reposition out of the groups that did well in August like precious metals. It will take a bit of time to transition which is why I'm optimistic that we will see some better stock picking action if the breakout holds and momentum continues.
A few small-caps on my radar today are Recro Pharma (REPH) , The Rubicon Project (RUBI) , Aurinia Pharmaceuticals (AUPH) , Digital Turbine (APPS) , Luna Innovations (LUNA) and Smith Micro Solutions (SMSI) .
Conditions are good for a run into the Federal Open Market Committee meeting on September 17. I've been in defensive mode with a very high level of cash for a while but will now be looking to be more aggressive with my buying. There is always the risk of negative macro developments but the technical picture suggests that we should have a positive bias moving ahead.