Traders are struggling to deal with a stock market that has had a great run but is now extended and overbought. The mainstream media is telling us that the positive action is due to hopes for a China trade deal but the big driver at this point is momentum and fear of being left out.
A better-than-expected ISM Non-Manufacturing number spiked the indices briefly but there are landmines in some of the small-cap earnings reports and choppiness in the FANG and large-cap momentum names.
There is quite a bit of talk about sentiment being a little too euphoric, as Helene Meisler discusses, but even the bulls are anticipating some sort of rest or pullback at this point.
I am staying focused on protecting profits and keeping accounts as close to highs as possible. I did start an index short in the form of ProShares UltraPro Short S&P500 (SPXU) , which is a 3x leveraged play, but my time frame here is very short. I'm just looking to catch some minor corrective action.
Recent favorite InMode Ltd. (INMD) (Sarge Guilfoyle also has his eyes on INMD) had a great report and is up sharply. I have a small position left and will be looking for remounts as it develops further. One interesting chart on my radar is AudioCodes Ltd. (AUDC) which is a nice little cup-and-handle formation.
The indices are picking up some steam to the downside now. This is exactly what the market needs at this point. Don't be too quick to believe that a major reversal is occurring.