What is most notable about the action this morning is the very strong pockets of momentum. There is a frenzy in the Electric Vehicle (EV) sector with names like Nio (NIO) and ElectraMeccannica Vehicles (SOLO) flying higher. Both have reversed after short-seller Citron issued a report on Nio but the aggressiveness of the trading suggests that this is not a market that is ready to suddenly collapse.
My list of individual stocks that are making big moves isn't particularly long but breadth is very strong with around 5800 gainers to 1500 laggards, and the speculative interest in 'secondary' stocks suggests that there is a lot of 'hot' money that is looking for action.
We haven't heard much about Robinhood traders since Robinhood stopped issuing reports about which stocks are the most active on its platform, but it is probably safe to assume that it is small individual traders that are piling into the EV sector.
Bears like to believe that frothy speculative action in smaller stocks is a contrary indicator but it can last far longer than seems possible. Trying to use it as a way to time a market turn is extremely difficult.
The fact that this speculative strength is occurring at the same time that there is increased concern over the growth in Covid cases is probably creating both a short squeeze and some fear of missing out. Action like this also helps to create a supply of dip-buyers that are anxious to catch some shallow pullbacks. It is very bullish price action and it is overwhelming the negative Covid narrative.
I've been locking in some gains today mostly because it's been a busy week and I'm not opposed to a fresh start on Monday. My selling is more based on my emotions than my market view. This weekend I'll have a column discussing the psychology of selling.
I'll continue to look for some new buys this afternoon but I'm going to be very selective.
