Big-cap technology stocks and the Nasdaq 100/Invesco fund (QQQ) continue to produce a little relative strength, but we're seeing mixed action on Monday morning. Nervous investors are now waiting for further information on the debt ceiling negotiations. Let's look at how these factors are shaping the market action -- and two trade ideas I have on my radar.
Breadth is solid, with around three gainers for every two losers. The Russell 2000 small cap index fund (IWM) is outperforming, thanks to a bounce in regional banks, as seen in their respective exchange-traded fund (KRE) , and a boost in biotechnology and its ETF (IBB) , but pockets of momentum continue to be sparse.
Cash is out there, still looking for a place to go, and that is holding up the market. Surprisingly, there doesn't appear to be much concern about a possible default if a debt ceiling deal is not made. Treasury Secretary Janet Yellen and other President Biden officials have warned about very dire consequences, including a sharp drop in the market, but the price action doesn't indicate that there is any real fear that could occur. The closer we are to the deadline, the more likely we could see some increased volatility if the negotiations become contentious. Still both sides have strong motivation to make a deal.
We have to stay patient while we wait for further developments and, unfortunately, that makes it tough to buy now. The risk of sharp moves on news headlines is high, and the prudent move is to stay patient and trade the volatility after we have some solid news.
My Stock of the Week is Roivant Sciences (ROIV) , which has a strong pipeline and good results for atopic dermatitis, which is already being used off-label. Technically the chart is solid, and it is moving to new multi-month highs this morning.
One interesting bottom fish on my radar today is Pfizer Inc. (PFE) , which is bouncing on a peer-reviewed study of its weight loss drug that can be taken orally, and which may be as effective as Ozempic, which is an injection. Ozempic has been one of the hottest drugs on the market, and an effective oral alternative would attract a high level of interest.
