There is quite a bit of red on the screens Monday and breadth runs about 3,000 gainers to 4,450 decliners, but this continues to be bullish action.
There is often an inclination to conclude that any downside action is a negative. However, the reality is that when an overbought and frothy market pulls back, that is a positive and makes it more likely that it will continue higher.
Bears are often very quick to believe that a weak day or two is the beginning of a significant top. It is usually just wishful thinking after being on the wrong side of the action for a while rather than some brilliant new insight. Healthy markets can handle pullbacks quite well, but there is often an inclination to rush to sell to preserve gains, although there isn't any meaningful technical breakdown.
It often feels like your stops are a magnet for the low print of the day, but that is just the nature of the beast at times. It can be extremely frustrating to sell a stock and then watch it quickly reverse higher, but discipline is the key to good results. If you keep modifying stops, then there is no point in even having them.
One good way to deal with the problem of stops triggering on a gap-down open is to temporarily suspend them until later in the day. As long as this is done systematically and not emotionally, it can be quite helpful, although you have to recognize that when a real correction does finally hit, the best exits may come at the open.
The S&P 500 is pushing to day highs as I write and the most notable aspect of this action is that small-cap stock-picking is still excellent. There still are some wild pockets of momentum in names such as GrowGeneration (GRWG) and Lordstown Motors (RIDE) .
When stock-picking stops working, I will turn more defensive and bearish. Currently, all the explanations for why this market should correct are just noise. Price action remains the key.