The market action Tuesday was largely the inverse of what we saw on Monday. Rather than a steady drip of selling and a close at the lows, stocks steadily improved all day and closed at the highs. Breadth was impressive with 5,700 gainers to 1,700 decliners and the number of new 12-month highs improved to around 575 by the close.
The FATMAAN names acted well and the mighty Apple (AAPL) showed some signs of regaining its leadership role. The biggest negative was poor action in the highly speculative SPAC sectors. Traders were grumbling about the price action and many of them dumped shares out of disgust. However, I think it was just a much-needed reset that will set up the good ones for some sizable rebounds.
There were also pockets of strength in solar energy, gambling, bitcoin, biotechnology, cannabis, and a few other odds and ends. The key to navigating this market is to find the sectors that are in favor and trade the individual stocks aggressively.
What works can shift quickly as we saw with SPACs Tuesday, but market players are intently focused on charts and price action and don't care much about the indices.
One news item that helped was that Senate Majority Mitch McConnell sounded determined to work out a fiscal stimulus deal in short order. While this has been anticipated for many months, it is probably not a good idea to be short on such news.
The strong close and the potential for positive seasonality into the end of the year is likely to stir up some fear of missing out (FOMO) and that should help to keep stock-picking robust. Some are rooting for a pullback but there are even more folks that would love to buy a pullback. This remains a bull market for stock-pickers.
Have a good evening. I'll see you Wednesday.