The bulls are looking for some upside follow through after strong action on Monday. A headline that White House Advisor Kellyanne Conway said "We're getting really close" to a deal on China helped to provide a temporary surge, but that spike appears to have attracted some sellers.
The contrarians are arguing that the expansion on Monday of strength to small-caps and high-beta names may have been too euphoric and may trigger some exhaustion. The logic is that when the buying spreads to more speculative groups it is an indication that buying power may be used up.
The timing of contrarian arguments is always extremely difficult and it is complicated further by the trading around the Thanksgiving holiday, which usually has a positive bias. We'll see what the market thinks about exhaustion by simply watching the price action. So far there isn't much evidence. The market may need some rest and consolidation, but that doesn't mean it will produce much downside.
The biotechnology group is particularly interesting here on Tuesday. Food and Drug Administration (FDA) approval of drugs from Global Blood Therapeutics Inc. (GBT) and ChemoCentryx Inc. (CCXI) surprised market players, which is leading to some speculation in other stocks that will have decisions soon on key drugs. Aurinia Pharmaceuticals Inc. (AUPH) and Baudax Bio Inc. (BXRX) are two that I've been following.
I've used strength to reduce some positions here on Tuesday morning, such as with Ping Identity Holding Corp. (PING) and Datadog Inc. (DDOG) . My cash levels have been much higher than I would like but my trade management has kept it that way as I take gains and have not been able to put cash to work fast enough.
Trading is going to slow quite a bit the rest of the week, but it is the pockets of momentum that will provide some entertainment. Here on Tuesday it is biotechnology that is the most lively.
