The indices continue to run steadily higher as many market participants grow concerned that they are technically extended and even a bit frothy. The S&P 500 has been positive for seven of the last eight days and 14 of the last 18 days. It is indicated higher again Tuesday morning.
If the S&P 500 was an individual stock, then it would probably be prudent to take some gains and wait for consolidation or a pullback before becoming more aggressive again. But it is an index that is supposed to indicate overall market conditions, and it does a fairly poor job of doing that.
While the S&P 500 is extended, many individual stocks are not. In fact, many small stocks, growth names and speculative favorites are just turning up out of a months-long downtrend, and their charts look nothing at all like the S&P 500.
It makes little sense to trade stocks coming off recent lows by looking at the chart of the S&P 500, but that is exactly what many "experts" are doing. They assume that stocks move in a highly correlated manner, and when the S&P 500 corrects, everything else does as well.
That is not the way the market operates this year. There has been constant rotational action with different groups leading at different times and very deep corrections in certain market areas. It has truly been a market of stocks rather than a stock market.
The primary issue for traders will be whether the action stays uncorrelated. Will speculative stocks stay active when the indices struggle? There is a general assumption that when the indices correct, everything else also will, but that hasn't been the case very much this year.
We have a mild start, but some flat action or pullbacks may help trading as the hot money gravitates toward what continues to work and creates more volatility.
I like the trading action in many individual stocks and will stay bullish until that shifts.