The 'sell the news' reaction to the second Covid vaccine announcement has been very mild so far. There has been some rotational action but not nearly to the extent that we saw last week. Both value and growth stocks are finding buyers but there is better relative strength in value names right now.
The biggest problem the market faces right now is that it has become technically extended and is aggressively pricing in the end of the Covid crisis. The optimism about the end of the chaos that has existed is probably too great but it reflects how tired most everyone is of the whole issue. There is no appetite for shutting down the economy regardless of the number of Covid cases that are being reported.
Technically the indices look quite good here. There has been strong momentum that creates both a short squeeze as well as fear of missing out. There is good underlying support and it is highly likely that dip buyers are going to show up quickly on weakness.
The biggest challenge I see right now isn't overall market conditions but finding individual stocks that are ready to run. The rotational action has shifted what is in favor. There are some great values among 'stay at home' names like Pacific Ethanol (PEIX) , Big Five Sporting Goods (BGFV) , and Nautilus (NLS) , but they are suffering from the perception that their business is going to decline quickly as the vaccines work and the economy returns to normal. I'm not so sure that is true but the weaker price action has to be navigated in the short term.
A new crop of leaders is starting to develop but it's not going to be a smooth ride. Traders have been attracted to electric vehicle plays but they aren't that correlated with 'reopening' the economy. They are leaders not because of Covid but because traders are having success there.
A couple of new names I'm looking at adding today are Westwater Resources (WWR) and Zovio (ZVO) . Both are coming off support levels after sharp pullbacks from highs. This sort of pattern looks to be the most likely to produce the best chances for continued movement.
