What is most notable about the market action right now is how quickly the focus is shifting. We are seeing rotation, dip buying and speculative trading going through a variety of gyrations while the S&P 500 and Nasdaq hover close to all-time highs. The most significant action is under the surface, and it is quite chaotic, but the rebound in the Nasdaq 100 (QQQ) is a good illustration of why even trying to time a sector of the market is fraught with peril.
The S&P 500 is back to Tuesday's highs after a very nasty late-day dip. Breadth is running two to one positive and the action looks quite complacent again, but I'm seeing some hesitancy on the speculative side, which is troubling, given the strength of the bounce in the big cap growth names. The Innovator IBD 50 Fund (FFTY) , which is a good measure of big-cap momentum stocks, is up 2.58% after losing 2.33% Tuesday.
I still see no reason to try to call a market top, but stock picking is becoming more challenging and that makes me automatically more cautious. I just am not finding as much to buy right now, so my cash levels are rising. I feel like I need to regroup after a couple of days of very high volatility in my accounts.
My inclination is to keep pressing when overall market conditions are strong and to not anticipate market tops, but there are times when we need to rest a bit even if the market refuses to. With various areas of the market in a state of flux right now I want to reset mentally and be ready for whatever may come next. I don't know what that will be but if we are mentally prepared we can deal with it.
It will be interesting to see if the bears make another try late in the day. They have consistently been unable to press their bets when they have an advantage and that looks like the case again.