What's Working in This Market: Chasing Strength in Semiconductors
Speculative action in smaller stocks and biotechnology has fizzled out to some extent.
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The market is running higher again on Thursday, primarily due to strength in the semiconductor sector. Names like Microchip Tech MCHP, On Semiconductor ON, Broadcom AVGO, and Micron MU are joining the euphoric action in Nvidia NVDA. There is also better action in the Magnificent Seven names.
Despite the indexes testing new highs again, this is not an easy market to buy. What has worked best recently is chasing the strength in semiconductors, and it is working again today because trades have a strong tendency to stick with whatever is working best.
Speculative action in smaller stocks IWM and biotechnology IBB has fizzled out to some extent, but we already have over 1000 stocks hitting new highs on better than three-to-one positive breadth.
This sort of market action can cause great frustration for buyers who don’t want to chase extended charts. There is no way to know how much longer that strategy will continue to work, and when it stops working, the pullbacks can be very sharp and sudden.
I am looking for some new names and tracking quite a few individual stocks, but I am doing very little buying.
Don’t forget that we have jobs news on Friday morning, which could be a market mover. Jerome Powell is testifying before the Senate, and there doesn’t seem to be much market interest in his comments, which are a repetition of yesterday.
