Strong markets have a tendency to stay sticky to the upside. The positive price action creates fear of missing out and helps to build a supply of dip buyers. Even when technical conditions become overbought the indices don't just suddenly collapse. They tend to work off the overbought conditions by churning or rotational action.
Here on Tuesday morning the indices continued to hold up well as a slew of major earnings reports hit. Facebook (FB) Monday night, and although the numbers were not the usual blow-out, expectations were low and the company announced a buyback of $50 billion.
Alphabet (GOOGL) , Microsoft (MSFT) , Twitter (TWTR) , Robinhood (HOOD) and Visa (V) all report earnings tonight, but so far earnings season has been generally good, and names such as UPS (UPS) and General Electric (GE) are helping the bullish cause this morning.
While much of the business media is focused on earnings, inflation and political debates on taxes and spending, the action in the stock market is all about stock picking. As I've been discussing, there is some excellent speculative action as traders aggressively chase cryptocurrency-related names, a select number of special purpose acquisition companies and a variety of secondary names.
Trading confidence has been building in the small-caps and it is changing the character of the action. Some of the small-caps that have been ignored for many months are starting to act better now as fundamentals are compelling and earnings reports are about to hit.
The big-picture bears are focused on overbought technical conditions of the indices, inflation worries and inflated valuations. In other words, there is nothing new there, and the price action refuses to cooperate with the pessimism.
This is a very good trading environment as active traders are looking for action and sometimes even create it.