The bears have been growling lately, but they may have become too negative, too quickly.
Without any significant news, the Nasdaq 100/Invesco fund (QQQ) is leading the indexes higher with a gain of 0.9%. Breadth is solid also, with almost two stocks up for each one that is down. This is mostly index and big-cap-driven action, as few pockets of speculative strength are emerging. Even the AI names are sluggish.
This is most likely squeeze action, as the bears have been growing confident lately. Even if they are right about a correction brewing, it will not happen in a straight line, and it's likely some weak bears can't handle much upside right now. We saw a massive squeeze in the last few weeks that finally ended a few days ago, but there probably still are some nervous bulls out there who are worried about being on the wrong side of consumer price index report.
The CPI, which lands tomorrow, will be the big event determining where the market is headed. Investors have been very optimistic in front of recent CPI reports, but some worries have been creeping in after the inflationary report was revised higher for December on Friday by the Bureau of Labor Statistics. The CPI is now shown to have increased by 0.1% rather than declined by 0.1%, which the market had celebrated. Much of the recent market rally was driven by the reaction to CPI news that turned out to be incorrect, but the market still has not corrected much. Sometimes logic does not work very well when navigating the market.
While I see very few opportunities to move right now, my "Stock of the Week" is Rain Oncology, Inc. (RAIN) . Rain is a late-stage oncology company developing genetics-based precision therapies targeting cancer. Rain's lead product candidate, milademetan, is a small-molecule oral inhibitor in late-stage clinical trial for a type of cancer that occurs in fat cells. In addition to milademetan, Rain is also developing a preclinical program focused on inducing synthetic lethality in cancer cells. Initially, the results were expected in the first quarter but were pushed back to the second quarter. At least one analyst from Jones Research believes this could be a positive sign. RAIN has seven analysts with 12-month price targets in the last three months following the stock. The average price target is $19.43, with a high of $29 and a low of $15.
This stock is a bet on the Phase 3 news and therefore is high risk. I am looking for positive anticipation to build into the news, but we do not know when it might hit.
My other favored names include Beyond Air Inc. (XAIR) , CECO Environmental Corp. (CECO) , Dole (DOLE) , Sensus Healthcare Inc. (SRTS) , Veritone (VERI) , and Inmode Ltd. (INMD) . But I don't see any reason to build positions now. I don't trust upside momentum to be sustained, and there is the potential for some sizable dips if the market turns soft.
Technically the stock had a significant volume surge on Friday, which took it up to the overhead resistance line. That volume may indicate that optimism is building and leading to more upside in front of the news. I'm trading the stock aggressively while waiting for news.
(Please note that due to factors including low market capitalization and/or insufficient public float, we consider this stock to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.)