The indices continued to build on the buying surge created by the combination of a dovish Fed and better than expected jobs news. Both the Nasdaq 100 ETF (QQQ) and the Russell 2000 ETF (IWM) have bounced over 10% from the lows now
While the indices have gone from oversold to overbought quite quickly, the big positive for market players is that the action is shifting form a focus on the indices to individual stocks. There were some great pockets of strength today in biotechnology and individual stocks such as Roku (ROKU) . The big cap FAANG names lagged but that didn't seem to have much impact on overall market sentiment.
What I am watching for as we move into earnings season is more focus on stock picking. If the indices can consolidate or pull back while a good number of individual stocks show relative strength it will bode well as the catalysts created by earnings season take hold.
It would be nice to declare that the worst of the corrective action is over but it is foolish to believe that the indices can travel straight back up after what they have been through lately. This sort of action creates overhead resistance and there is a lot of it.
It is important to note that despite the huge moves since December 24, only 35 stocks hit new 12-month highs today. Most stocks are still well off recent highs and many are sitting on unrealized losses. This impacts the psychology of the action. Many market players have been stressed out by the action and will be relieved to escape with diminished losses. They aren't worried about making money; they are worried about not losing as much.
Ideally the indices will consolidate and the stock picking in individual stocks will develop further. Also be aware that there may be some news on trade with China soon that will cause sharp movement.
Have a good evening. I'll see you tomorrow.