The indices were in a precarious position on Friday as the S&P 500 ( (SPY) ETF) broke below its 50-day simple moving average since April 24. The SPY rebounded into the close and now, in retrospect, that looks like all the washout that was needed to put in a low.
As is so often the case, the bears are unable to close the deal when it looks like they have an edge.
The price action received a big boost Monday as a slew of major deals hit. The whining and complaining about valuation doesn't work very well when a stock like Immunomedics (IMMU) receives a takeover bid from Gilead Sciences (GILD) at double its current price.
What was particularly impressive Monday was that it was not the same old FATMAAN names that led the market higher. The Nasdaq 100 ETF (QQQ) had a decent bounce but it was the small-caps that led as the Russell 2000 ETF (IWM) gained 2.6%. This was driven in part by a big surge in the biotechnology sector, which gained 5.4%
Breadth was around 5,900 gainers to 1,400 decliners, but despite this broad strength, there were only around 100 stocks making new 12-month highs. This is not frothy action like couple of weeks ago when Apple (AAPL) , Tesla (TSLA) , and a few other big names were being chased like hot penny stocks.
The best way to navigate this market right now is to find the sectors and groups that are working and stick with the good charts and positive price action. The easiest mistake to make is to keep trying to anticipate trouble ahead.
There are plenty of good charts out there and some solid valuations. That doesn't mean that things are going straight up but there is no question that you can't navigate this market with a bearish bias.
Have a good evening. I'll see you Tuesday.