The Thanksgiving Week celebration continues here on Tuesday morning as the indices blast higher on news that the head of the General Services Administration (GSA) has told the Biden team that transition can formally begin. President Trump endorsed the move in a tweet and the market is reacting favorably to the greater clarity.
Also, the market appears to be satisfied with the appointment of former Federal Reserve Chairwoman Janet Yellen as the new Secretary of Treasury. She is a known quality and her dovish credentials are well-established. She is regarded as far more of a centralist than other potential candidates such as Elizabeth Warren.
Not only are the political hurdles being jumped but the market now has more positive vaccine news in place and a timetable for the distribution is being put in place. While there is still much concern about the growth of Covid-19 cases in the short term the market is looking ahead several months and a return to normality.
A fourth factor that is boosting the market this morning is the continuation of the small-cap momentum that has been driving the electric vehicle sector and other speculative small-caps. The action is downright frothy now and there are some announcements of secondary offerings, but the hot money doesn't give up on this sort of momentum easily.
The main question now is whether the rally is now going to broaden into the names that have been left out. The FATMAAN stocks and the IBD 50 names have been lagging while money has flowed into value stocks and speculative small-caps.
Typically it is the big-cap technology names comprising the IBD 50 that are the main market leaders, so it has been a refreshing change to allow some other groups to take a turn in the spotlight, However, healthy markets are normally led by high-growth technology names and if the market is going to trend those names need to start acting better.
We have a very interesting mix of action out there. It has been fast and furious action recently and we need to be on guard for a sudden shift in rotational action. There is still some very aggressive chasing in special purpose acquisition company (SPAC) names taking place and I expect to see aggressive traders keep pushing despite how extended some of these names have become.
This is a market for the trading of individual stocks more than anything else. The indices are seldom as misleading as they are now. If you want to make money then you need to find the hot themes and stay with them as long as possible.
