The bears had an excellent opportunity to build a little downside momentum after a poor start to the new year. But, just like in 2020, they were unable to execute.
Stocks bounced back nicely Tuesday, with small-cap stock-picking leading the charge. The dip-buyers were active, and the speculative traders continue to trade just like they did in the year-end frenzy.
Breadth was better than the inverse of Monday with around 5,700 gainers and 1,770 decliners. New 12-month highs did contract a little to about 490, but the list of stocks up more than 10% was impressively long.
Traders debated whether the special election in Georgia would impact groups such as cannabis, gambling and solar energy. Others were also wondering about overall market impact but seemed a little confused about the likely outcome of the election and what the market wanted. There is a strong belief that the market is rooting for at least one Republican win to guarantee gridlock. Still, there seem to be some market players that think a Democratic sweep may be a short-term positive due to increased fiscal stimulus.
It appears that liquidity, combined with fear of not keeping up with the market, is overcoming the worries about the election and the increasingly shrill bears that believe disaster is just around the corner.
For the last several months, I have been singing the praises of stock-picking over market timing. I can't help but wonder how much longer it will last, but I will stick with what is working until it isn't working any longer. Currently, this market is looking much like it did in December, so I'll continue to play it the same way.
Have a good evening. I'll see you Wednesday.