For a while on Friday morning it looked like the bears would finally enjoy some "sell the news" action.
The big four technology names, Apple (AAPL) , Facebook (FB) , Amazon (AMZN) and Alphabet (GOOGL) , had posted great earnings and were trading very strongly, but there was broad selling on very poor breadth. Small-caps lagged and both the DJIA and S&P 500 were trading in negative territory.
Despite what was looking like a good start on some corrective action, Apple refused to relent. Not only did it hold up well but it attracted even more buying interest and ramped into the close. The "sell the news" sellers found themselves on the wrong side of the action and the indices exploded higher into the close.
Some of the late action was likely due to end-of-the-month window-dressing and some of it was likely due to computer algorithms delivering and epic squeeze. However, this is a market that simply has no fear of staying with the big-cap technology names that have been leading for so long. At the close Friday Apple has more than doubled from its low point at the bottom in March and has increased its market cap by a stunning $900 billion.
There is nothing fundamentally or economically to justify this action. Even though earnings were very good, they were well anticipated and already well discounted. Covid-19 is still raging and the economic fallout is still undetermined. However, this is a market-driven by emotion and psychology. Strength begets strength and causes fear of being left out. Whether it is logical and reasonable is not relevant.
Next week we have hundreds more earnings reports on the schedule, although most of the big names have now reported. We will now move to secondary stocks, which usually creates some good trading action.
My thesis recently has been to focus on stock-picking rather than trying to time the indices. The action Friday was a good example of why that is the better approach. It simply is not possible to call a top in this market without suffering some painful losses.
Have a great weekend. I'll see you on Monday.