After a good run, stocks lost energy Wednesday. Breadth dropped sharply in the final hour and ended up at around 3,200 gainers to 4,300 decliners, but there continued to be quite a bit of positive speculative action. Many names faded as the day progressed, with very few closing near their intraday highs. But there were still quite a few good gains in individual names. A poor close is not a positive sign, but the market can afford to give some gains back at this point.
What continues to be the most favorable thing about this market is how traders are still focused on finding good charts and good setups. There isn't the sort of correlated selling that tended to occur when corrective action is taking hold.
Many stocks, however, need some work to develop better charts and the energy of the recent vaccine news is now starting to fade. There is still a high level of optimism about reopening the economy, but there are growing concerns about how long it may take and the issues that will occur in the interim as the number of Covid cases continues to increase. There is light at the end of the tunnel, but it is going to be a bumpy ride.
As long as individual stock picking remains robust, I will maintain a bullish posture. The list of stocks on my screens that were up more than 10% Wednesday was quite long and there are no signs that the appetite for aggressive trading is slowing.
The best thing that can happen at this point is some flat-to-down action in the indexes while individual stock charts continue to develop. We have positive seasonality helping the bullish cause and there doesn't seem to be much interest in embracing the bearish narrative. Rather than anticipate disaster, stick with what is working.
Have a good evening. I'll see you tomorrow.