The primary market theme recently has been mixed action in the senior indexes, while small-cap stocks run wild.
That continued Tuesday with the Russell 2000 exchange-traded fund (IWM) running up 1.8% vs. the Nasdaq 100 ETF (QQQ) , which lost 0.14%. We had nearly 1,000 stocks hitting new 12-month highs on breadth of about 5,350 gainers to 2,100 decliners.
All you really need to understand about the market right now is that individual traders are intently focused on trading individual stocks, and they are creating strong momentum in groups like special purpose acquisition companies, solar energy and electric vehicles. Even penny stocks trading under $1 are seeing a surge in interest.
In this environment, the only thing that really matters is price action and themes. News flow, fundamentals, valuations, and even technical conditions don't matter much. It is Ponzi scheme-like to some degree, because it continues to work as long as there is confidence that there is more liquidity and more buyers willing to pay a higher price.
The Wall Street cognoscenti tend to be offended by this sort of "brainless" action, while the opportunistic trader is euphoric with the endless bounty of fast-moving stocks.
Will it end badly? Yes, all rallies end badly. But we don't know when and we certainly can rack up a pretty hefty cushion of profits while we wait.
Have a good evening. I'll see you tomorrow.
