Now the Market's Getting Tricky

The indexes did a nice job of building on Friday's breakout and moving to new all-time highs, but all the gains came on the opening gap. After the strong open, stocks drifted and failed to entice buyers who were willing to chase them higher.

That lack of intraday momentum isn't too surprising, as many stocks are now technically extended. But it is also impressive that selling did not accelerate. There was a strong underlying bid all day, as underinvested bulls looked for entries.

Markets that make strong moves like this one have over the past couple weeks tended to stay sticky to the upside. Bears become discouraged and give up, and those who missed out are anxious to buy dips. This market is primarily driven by fear of missing out and dip-buying, rather than by euphoric bulls who think there is a never-ending uptrend. The sentiment is supportive of more upside, because there are so many that are struggling to keep pace.

This breakout move is one of the least anticipated that I can remember. Not only did few see it coming, but most were looking for recession fears to grow and for "sell the news" reactions to earnings and trade news.

The market is at a tricky juncture here, as it is too strong to short, but too extended to chase. The best thing that could happen at this juncture is that there is some consolidation of recent gains or some profit taking and pullbacks. There is no reason to expect a sharp reversal, but it never hurts to protect gains and to play some strong defense after a good run.

Have a good evening. I'll see you Tuesday.

At the time of publication, DePorre had no position in the securities mentioned.