The market melt-up paused briefly Monday morning but picked up traction as the day progressed. Breadth moved from two-to-one negative in the morning to 4,500-3,700 positive at the close as all the indexes finished in positive territory once again.
What is most notable about melt-up action is that there really isn't an obvious reason for it. This action isn't driven by any obvious positive news or new developments. It is just a flow of cash looking for a place to go, and the path of least resistance is to buy stocks.
The easy thing to do in this environment is to call a top. Stocks are obviously overbought and in need of rest, so, of course, a top is likely to occur soon. The hard thing to do is to actually trade it. The same bearish arguments about the market could have been made a week ago, and nothing has changed other than the fact that most stocks are higher.
If you are a prudent trader, then you likely aren't doing very much right now. Most stocks are too extended to buy, but they are holding up too well to try to short. Some folks like to try to catch a top by shorting into strength, but that has been a recipe for pain recently.
At this point, even the bulls would be relieved if there were pullbacks that allowed charts to develop, but the market always does a nice job of frustrating as many folks as possible.
Have a good evening. I'll see you tomorrow.
