It has been a very busy week and the market and many traders are looking fatigued. Breadth is running around 2,200 losers to 5,000 decliners, the number of new 12-month highs is down to around 300, and the pockets of strength in individual stocks is narrower.
It isn't terrible action but it looks like many folks are ready to wrap up the week and start fresh on Monday.
The good news is that a pullback at this point, which fills the gap that was created back on Dec. 1 on the SPDR S&P 500 ETF (SPY) chart, would be a very good setup for some upside action into the end of the year.
The important question to ponder is whether there will be a continuation of the speculative trading and individual stock-picking that has worked so well for traders in recent weeks? There has been a great trading market with themes like SPACs, electric vehicle companies, solar energy, etc. offering fantastic opportunities.
There is a tendency for many traders to start anticipating that the party is about to end but I do not think that is the case. We have positive seasonality into the end of the year and this action has made many traders anxious to jump on the next round of opportunities after some pullbacks.
I've been doing some repositioning but mostly I'm just setting the stage for more aggressive trading next week.
I believe that the SPAC sector will continue to offer the best opportunities and that is what I will be focused on. A couple of examples on my radar are Desktop Metal (DM) , which has dropped sharply after completing its merger and changing its symbol from "TRNE." Another name I'm watching is Forum Merger III (FIII) , a SPAC that announced a deal today with Electric Last Mile, which produces "urban delivery vans" for customers such as Federal Express (FDX) .
The weaker action this week is exactly what the market needs to keep running into the holidays. It is a good time to refine your shopping lists and I'll be doing that this weekend.