The S&P 500 has advanced on 20 of the last 24 days and is at a new all-time high as we head into the three-day Labor Day weekend. The momentum has been powerful, but skeptics have been questioning the trend as it has come on weak breadth. A market this strong typically would see breadth at 2-to-1 positive or better, but that has not been the case.
Ironically, the weak breadth probably has been more of a positive than a negative. It allows for daily rotation as there are many individual stocks that are not wildly extended like the indices or some of the FATMAAN names. The indices managed another very strong day on Wednesday even though both Apple AAPL and Tesla TSLA were negative and not leading as they had a few days ago.
The thing that is most impressive about this market is the strong stock picking combined with the rotational action. There is still a strong appetite to put liquidity to work and market players are finding ways to do it on a daily basis. On Wednesday, they gravitated toward special purpose acquisition company (SPAC) names, semiconductors, gambling plays and a variety of other themes.
Although the indices are clearly extended and could use some rest and consolidation, it has been quite a battle and a losing trade to try to time when that will occur. It just is not working at this time. I discussed on Wednesday the technical signs that a pullback in the indices may occur and so far they just aren't there. There was a brief intraday reversal Wednesday, but it was bought aggressively and the indices ended up closing strongly.
Weekly unemployment claims are coming up here on Thursday morning but have had little impact. The market is more focused on news that a Covid-19 vaccine may start to be rolled out to high-risk individuals and health care workers as soon as late October. The economy continues to open and the number of Covid cases and deaths are trending down. Optimism about the path of this scourge is increasing and that is part of the reason there has been so much rotational action in the market.
My game plan is still the same. I'm watching the indices but have no interest in trying to fight the uptrend until there is some shift in the trend. My primary focus is finding the sectors and stocks that are working and trading them aggressively. I am uninterested in hearing arguments from the bears about why the market is doomed. There are trades that are working and those are what I'm going to trade.
We have some minor weakness but there is another SPAC here on Thursday morning. Kensington Capital Acquisition (KCAC) is working on a deal with a supplier of batteries for the electric vehicle industry.