For the first time since its inception in 1982 the S&P 500 has gapped up at the open by 0.5% for five straight days. That is a remarkable statistic being reported by Jason Goepfert this morning, but what is even more remarkable is that it is occurring during a crisis unlike any we have ever seen before.
This remarkable and consistent strength is causing a huge amount of consternation among market participants that are finding the logic very hard to embrace.
What is making this market so much more difficult isn't that it is bullish action but that it is so lopsided. Even if you are bullish and want to try to ride the uptrend the entry points are extremely difficult. One of the big problems for professional money managers is that even if they want to put cash to work this sort of price action does not lead to prudent entry points. If you don't like to chase it is nearly impossible when the S&P 500 gaps up five straight days in a row.
The other notable issue today is that there continues to be a rotation out of the big cap FANG names that are reporting earnings this week and into small caps and financials. As I discussed last night this rotation strikes me as being more of a late phase move rather than early stage.
I'm using the strength in small caps this morning to reduce a number of positions primarily in the biotechnology area. I'm still holding core positions but have reduced a few things like Biohaven (BHVN) , Coherus (CHRS) , Datadog (DDOG) and Personalis (PSNL) .
These moves are simply trading discipline rather than any attempt at market timing. When you have good gains and positions become extended then the correct strategy is to do some selling.
There is quite a bit of fading in the early action which is probably due in part to concern about a 'sell the news' reaction to upcoming reports from the likes of Alphabet (GOOGL) , Amazon (AMZN) , and others.