The market is undergoing a substantial change in character and it is creating very difficult trading conditions. There have been two major news events in the past week - the election and a vaccine - and that is causing some major changes in the narratives that are moving in the market.
Breadth is not nearly as positive as yesterday but it is still in the green with 3890 gainers to 3270 decliners, but what is most illustrative of the shift in market character is that only 40 stocks are making new 12-month highs. This is a function of the huge rotation and the reversal in the old leadership. The stocks that are rallying now are the laggards and they are nowhere close to new highs.
One issue that is frustrating many traders is that even stocks that are good 'values' are selling off without regard to their numbers simply because they are deemed 'stay at home names'. A couple of good example are Nautilus (NLS) , which produces home exercise equipment and had great earnings, and Pacific Ethanol (PEIX) , which produces ingredients for hand sanitizers. Both have great numbers but the bearish argument is that the world is changing and maybe these stocks can't continue to grow at high levels.
Quite a few stocks are going through the pain of reevaluation right now. Some of them will turn out to be good buys but some may never see strong recoveries if the 'open the economy' narrative continues to build.
Many traders focus on momentum and with the transition that is taking place there just aren't many stocks that met the criteria for trend following, momentum players. The names that have bounced in the laggard sectors have not yet proven themselves and many never will.
This is very tough trading right now and the only way to deal with it is to be patient while the transitional action develops further.
I'm doing very little but two stocks I'm adding this morning are Hyllion Holdings (HYLN) and Village Farms (VFF) .
