Strength in the indices continues to catch market participants by surprise. Many are struggling with the market behavior that suggests that the coronavirus economic impact is de minimis.
The bulls are explaining the action by focusing on central bank action rather than fundamental considers.
The dilemma is that there is just no way to rationally gauge how long momentum may persist. Even if the negative economic impact of the coronavirus is compelling there is no way to know when it may matter to the market.
Many traders don't realize how the nature of price action has shifted. In my early days of trading, one of the very routine trades I made with a high level of success was to "fade the open." Selling into a gap-up open often had a high degree of success as there was a technical tendency for that gap to be filled.
In the last decade, that sort of routine price action has shifted. I'd be curious to see some statistics on it, but my impression is that there is now a much greater inclination for "gap-and-go" movement like we saw on Tuesday.
As a result of this shift in price action, my inclination is to not fade the open but look for intraday reversals to develop before pressing the short side.
We are starting to see some reversal action as I write and many of the recent movers such as InMode (INMD) (one of my 2020 picks), Datadog (DDOG) (another pick), Molecular Templates (MTEM) , Enphase Energy (ENPH) and Repay Holdings (RPAY) are seeing reversals after strong pops.
Tuesday's highs are the key technical levels at this point. We've already seen Tesla TSLA show some classic reversal action and it is a good template to watch for the broader market but on a much less volatile scale.