Sometimes stocks move on their individual merits and sometimes they move for other reasons. Monday was one of those days when "other reasons" were the main driving force. The bond market was closed for the Columbus Day holiday, which slowed volume, and the focus in Washington turned to the Supreme Court. There was hardly a mention of fiscal stimulus, although it was an obsession last week and it is still too early for earnings seasons or the election to matter much.
With the lack of news to drive the market, it was a perfect setup from the lagging FATMAAN tech stocks and the Nasdaq 100 fund (IWM) to squeeze higher. There was much speculation that SoftBank (SFTBY) -- the infamous Nasdaq Whale -- was back with aggressive buying of options on a narrow group of big-cap names that dominate the indexes.
Buying options doesn't normally drive the market that much, but when done on the scale of the whale, it creates tremendous upward pressure, because the brokers that sell the options buy the underlying stock, so that they have zero exposure to the trade. They made their commission on the trade and don't want to be short the calls they sold.
This dynamic drove the market at the end of August and it sure felt the same again Monday. That spike ended poorly, but market conditions are a bit different at this point. Small caps have been leading this time, rather than doing nothing, so that leads to some rotational action.
It was a very messy day of action with stocks moving around primarily based on sector and theme rotation, rather than anything to do with fundamental or technical merit. FATMAAN stocks didn't suddenly have some news to justify the 5% jump that some of them enjoyed.
Sometimes what moves the market has little to do with individual stocks. That was the case Monday, and, to make it even more challenging, we have no idea how much longer it will last.
Have a good evening. I will see you tomorrow.