Some days trading is primarily about taking action. Other days trading is mostly about developing strategy. Tuesday is the latter.
This is a good day to take a step back, contemplate the overall action, and prepare mentally for what happens next.
The market is at a key juncture right now as the election uncertainty is resolved and the focus shifts to the eventual end of the Covid crisis. There is still a long road ahead before these issues are settled but the market is looking forward and making an effort to discount what may happen.
As is my typical approach, I'm not making any major predictions other than the likelihood that the market is undergoing a change in character that will have an impact on what works best in the weeks and months ahead. The rotational action we have been seeing is likely not finished and there are going to be some reverberations as it plays out.
As I noted earlier even stocks that appear to be good values are seeing limited bounce because there still is great uncertainty about how the economy will progress from here.
I've raised my cash levels to around 50% with most of the holdings I have left in stocks that I favor fundamentally. A few examples are Ocular Therapeutix (OCUL) , Horizon Therapeutics (HZNP) , Myovant Sciences (MYOV) , Big 5 Sporting Goods (BGFV) , and Green Thumb Industries (GTBIF) .
My focus going forward will be to identify some new leadership. I'll be looking at the chart action along with the fundamentals. Relative strength will be the first tip off that a stock may be an emerging leader.
I don't expect to build new positions very quickly right now but once this rotational action plays out to a greater degree it will become easier to start focusing on new trends.
There was some decent intraday bounce action but that is fading now, which is what you'd expect in a market undergoing a transition.
The good news is that there will be an interesting crop of new opportunities if we stay patient and keep hunting.