It was a dramatic week of news with a very contentious presidential debate, a growing number of Covid-19 cases, the start of the fourth quarter, and President Trump testing positive for the virus. Despite the blaring headlines, the stock market action was mostly positive.
What was most notable this week was that rotational action picked up again. The Nasdaq 100 (QQQ) and some of the bigger-cap stocks lagged while money rotated into some DJIA names and small-caps. It was much trickier trading but individual stock-picking remained robust.
One of the main reasons that stocks held up well was that there are hopes that Congress will agree on a fiscal stimulus deal. While the market bounced around on various reports on progress, the hope for a deal was so strong that the market essentially shrugged at the news that Trump had Covid.
What is most positive about this market right now is that there is no rush for the exits. There is selling -- but it is not correlated. Market participants keep looking for places to put their cash. Even with the news about Trump Friday breadth actually finished positive with around 3,750 gainers to 3,600 decliners.
Compare this action to what happened back in February and March when the Covid crisis first started to impact the market. There were no safe havens. Everything was sold regardless of merit and no one was interested in bottom fishing or finding values. They simply wanted to escape.
The bears are convinced that this can't last. They believe that the economic weakness is going to be felt sooner or later and that stocks will sink when the focus turns to the lingering damage that is being done. Maybe, but there are no signs of that as we head into earnings season.
There are many good reasons to worry about this market but until the action in individual stocks shifts, I'm sticking with a mostly bullish view.
Have a great weekend. I'll see you on Monday.