Dip buyers and speculative traders continue to provide very good market support Thursday but you have to wonder when they may take a rest.
Futures were weak overnight and there was some selling following the weekly unemployment numbers. The opening dip was bought, however, and the S&P 500 was back in the green for a while. Breadth is running about 3,800 gainers to 3,200 decliners, which is reflected in the relative strength of small-cap stocks ( (IWM) ETF).
What many market bears are missing as they talk about the economy, valuations and other macro considerations is that sentiment is very robust, due in large part to the very strong speculative trader. The little guy is making money in this environment and the big players are struggling to keep pace. The mood is positive and dips are simply an opportunity for the next trade.
This mood won't last forever but trying to anticipate when it will end is a difficult task. The liquidity out there is what keeps it going and is preventing any sustained downside from developing.
One sector that aggressive traders are focusing on right now is Special Purpose Acquisition Companies or SPACs. SPACs are the market version of private equity. The promoters raise money and then look for a private company to buy.
Traders are now shaking the trees looking for the next hot players and they are creating some movement where little may have occurred previously. Several names on my radar in this sector are Megalith Financial Acquisition Corp. (MFAC) , ARYA Sciences Acquisition Corp. (ARYA) , HL Acquisitions Corp. (HCCH) and Graf Industrial Corp. (GRAF) . They are all high-risk plays but they are interesting trading vehicles.