The action has cooled off a little, with breadth running about 4500 gainers to 3500 decliners. There are nearly 700 stocks hitting new 12-month highs as the Russell 2000 (IWM) leads.
Although everyone is very aware of how extended the indices and many stocks are after a straight-up run, there is still a strong speculative appetite. My list of stocks that are up more than 10% is too long to count, and there are at least 15 names up more than 20%.
What is happening is that the speculative energy keeps shifting into different names, and that is holding up the indices and preventing the sort of corrective action that many market participants think is overdue.
When contemplating this action, keep in mind that the Russell 2000 broke out of a 10-month-long base just last week. Many small stocks and secondary names have been underperforming for months, and they are not even close to the levels of their big-cap cousins.
If you are focused on the senior indices, then you will have a false impression of the technical health of many stocks. Just take a look at the cannabis names, for example. They hit multi-month lows last week and just started to bounce. This group is the polar opposite of the FATMAAN names that have been hitting new 12-month highs dozens of times this year.
None of this means that we won't see some significant volatility, but I remain quite positive about the prospects for trading in individual stocks as we head into the end of the year. Yes, the indices are in nose-bleed territory, but this is a great trading environment and has a foundation of speculative strength.
It is never a bad idea to take profits in stocks that become too extended but don't generalize about the overall health of the market on that basis.