After two days of corrective action and rotation, leading technology stocks regained their composure on Monday. The action was similar to what has occurred during the steady uptrend that started in March, but was it just a temporary respite from a deeper correction or the resumption of a trend that will be driving by earnings, monetary stimulus and a new economic relief bill?
The key to navigating this market has been to stay focused on price action and to ignore the headlines about Covid-19 and the associated economic issues. While there are numerous bears warning us that danger lies ahead as we enter a seasonally difficult time of the year, there is still no major shift in the price action.
One aspect of the market that many of the pessimistic pundits seem to be missing is the positive sentiment among retail investors. These traders and investors consistently have supported the market on any dips and pauses and they are showing few signs of fatigue.
Retail traders seem to be unconcerned about macro-economic arguments and valuation concerns. All they really worry about is whether their trades are working. When there is a period of sustained losses this will shift, but it is not happening yet.
We have a slew of earnings reports on the schedule with Advanced Micro Devices (AMD) , Ebay (EBAY) and Starbucks (SBUX) reporting here on Tuesday after the close. Thursday night will offer some big fireworks when Apple (AAPL) , Facebook (FB) and Alphabet (GOOGL) all report. The response to these reports will be instructive, but it is interesting to see how both Microsoft (MSFT) and Tesla (TSLA) have bounced a bit since they suffered a "sell the news" response.
The big danger in this market is trying to time a major move in the indices. There simply is no way to do that in a rational manner. The best approach is to continue to stay vigilant and focus on short-term trading of the price action.
Precious metals are reversing here on Tuesday morning as the dollar strengthens, which should trigger some rotational action. This remains a market for stock picking, but there is headline risk that suddenly may start to matter without warning.