Stocks gapped higher for the second day in a row but aren't gaining as much intraday traction as they did yesterday. Breadth is running around 5400 gainers to 2500 decliners which is okay but not spectacular. New 12 month highs have expanded to over 400, which is a nice increase but far from extreme.
The S&P 500 is now back over its 50-day simple moving average, but the Russell 200 (IWM) is showing better relative strength. The Nasdaq 100 is a little soft as FATMAAN names have limited momentum, but big-cap, high PE growth are seeing select interest.
One of the more notable things on my screens is that the pockets of very hot momentum are quite narrow. I see only about a dozen names up 10%. I suspect this is due to some of the hot money rotating into cryptocurrency plays which are very hot on a report that the SEC is likely to approve a Bitcoin futures ETF. The best trading right now is mostly in Bitcoin mining names like Cipher Mining (CIFR) , Marathon Digital (MARA) , and Hut 8 Mining (HUT) .
The good news is that even though some stocks have quickly become extended, there is likely to be much better support on pullbacks. This is textbook bottoming action, and we now have a much more bullish technical picture than we had on Tuesday.
I'm still holding very high levels of cash and am looking to put it to work, but I'm staying selective. I plan on increasing my incremental buying, but I'm not going to do any major chasing.
Traders often find these abrupt moves higher to be difficult to trade as they are not well-positioned and then are forced to chase entry points just as the market is ready to rest. It can be quite hard to keep pace with the indices when you have been taking a defensive stance for a month, but strong markets tend to persist, and the opportunities will be easier to spot.