The market continues to do an exceptionally fine job of confounding as many market participants as possible. After an intraday reversal and a poor close on Tuesday, it looked like the bears may be in position for a little downside follow-through. There wasn't any major news flow to drive selling, but the indexes were extended and the very sharp rotational action had shaken things up.
Instead of further selling pressure, the growth stocks that have been down three days in a row, come roaring back. The Nasdaq 100 fund, Invesco QQQ (QQQ) , gained 2.52% and recouped two days of losses quite easily. Banks Financial Select Sector SPDR Fund (XLF) reversed sharply to the downside, precious metals failed to bounce back from a disaster on Tuesday, and speculative trading cooled off.
It has been quite a chaotic mix of action lately, but the headline will go to the S&P 500, which managed to hit a new all-time high as it surpassed the levels it had reached back on Feb. 19, when Covid-19 was being completely ignored.
The fact that the S&P 500 has been able to recover so easily despite the Covid-19 crisis is a testament to the Fed and the fiscal stimulus that has been thrown at the economy and spilled over into the financial markets. There is no fundamental reason for the indexes to be at the same levels they were at back in February, but if you want logic, then you probably should study mathematics rather than the stock market.
With the indexes at highs, it is difficult to be too negative, but the chaotic rotation we are seeing lately is making it quite hard to navigate this market. I've been preaching for quite a while to stay focused on stock picking but the stock picking is now becoming harder and that is my signal to raise some cash. I'm not predicting that the indices will start to decline. I'm simply observing that it is harder to find new stocks to buy right now.
We'll see how things unfold from here, and given the inconsistency recently, a surprise wouldn't be that surprising.
Have a good evening. I'll see you tomorrow.