There is a major disconnect between news coverage and the action in the stock market. Highly emotional reporting about politics, President Trump, and the Covid-19 crisis is dominating the airwaves while the stock market continues to produce positive price action and bullish technical patterns.
Typically, the market does not react well to chaos and uncertainty but the market is often perverse and this sort of environment can create a "climb the wall of worry" dynamic. What happens is that many players are hesitant to risk money in the market because of the intensely negative sentiment but when stocks refuse to go down they begin to worry that they will miss out on upside so they start to put some capital to work. These small buys help to drive the market higher and that creates more worry about missing out and that causes more buying.
The wall of worry dynamic works best when there is a major disconnect between the news headlines and the price action. It also is intensified when there is a high level of liquidity. That idle cash has to go someplace and it is more likely to flow into stocks when they are going up.
The wall of worry and the high level of liquidity are not the only factors driving the market. There is also a high level of speculative interest in small-caps and various market sectors such as battery-related names. The folks that trade these stocks tend to ignore the macro worries that many pundits are so fond of discussing.
I have been discussing this for months now but the dynamic is still working and has to be embraced if you want to make money in this market --stock-picking is working. Market participants that focus on price action, good charts, and positive fundamentals, are making money. The outperformance by the Russell 2000 (IWM) is confirmation of this.
There are two choices right now. You can try to navigate the market based on the screaming headlines about Covid and politics or you can try to navigate the market based on the price action and the movement of individual stocks. The former dominates the market coverage and creates a wall of worry, while the latter is producing gains.
We have some minor selling to start the day but there already is strong speculative action again in lithium stocks.