We had positive news flow, strong breadth, some signs of underlying support and a favorable intraday reversal on Monday to help drive the market Tuesday. The indices have some decent gains so far with small caps outperforming but what we are missing one major thing - the Fear of Missing Out (FOMO).
We will see sustained positive momentum when market players start to worry that the market may start to run away to the upside without them. FOMO is what kept the market running for much of the last 10 years but the recent action has destroyed that force and now the much greater force is taking profits when you have them.
The smart move is to sell into strength like we have this morning and then look for reentry on pullbacks. The pullbacks keep on coming so there is no worry about putting that idle capital to work. If there are some new intraday highs and a strong close that will help create some concern about missing out...but we haven't had strength last long enough yet. The longer the gains hold the more inclined market players will be to put more cash to work.
One stock that has held up well in the weak market action since the end of August is McDonald's (MCD) . MCD has had two positives going for it. First, lower oil which increases discretionary spending for fast food and second, the image of a recession-proof haven in a difficult market. The argument is that McDonald's will benefit as restaurant goers seek less price alternatives when they have financial concerns.
The stock has been in a trading range over the past month with good support at around $180 and resistance as it approaches $190. It has done a nice job of increasing earnings 16% this year but it is struggling to grow revenues that were down 7% in the third quarter.
McDonald's is viewed as a safe haven in this tough market and as long as it holds the $180 area is likely to see some funds parked there. Whether it can outperform in a better acting market is questionable but the limited risk is appealing to conservative investors.
I'm still looking hard to find some new buys. My top technical buy today at Sharkinvesting.com was New Age Beverages (NBEV) which is working well. This is a play on CBD-infused beverages and may have benefited from comments made by the Coca-Cola (KO) CEO today on CNBC.