This Market Lacks Strong Leadership

Breadth has improved and the indices are near the highs of the day but the bounce has been fairly mild so far. As I mentioned earlier, the longer the indices stay positive the greater the inclination for market players to start putting more capital to work. There is worry about missing out but they aren't yet convinced that yesterday's selling was a one-and-done situation.

My game plan here is to not trust the bounce very much but to look for entry points in stocks that I like with a longer term time horizon. For example, HTG Molecular (HTGM) is one I've had good trades in earlier this year and it has now drifted back to its 200-day moving average. There is no immediate catalyst but it is at a point where the entry is pretty low risk unless the overall market, and biotechnology specifically, is under pressure.

The biggest negative I see in this market right now is how poorly certain groups like financials, semiconductors, precious metals and some biotechnology are acting. The FAANG leadership fizzled out pretty fast as well and the number of new highs has contracted to 78. Strong markets need some good leadership. It need not be broad but some pockets of momentum should stand out. Right now there isn't any decent leadership.

The indices are hitting new intraday highs as I write and that is sucking in more money off the sidelines. A close near the highs will draw in more interest. If some pockets of strength develop, then yesterdays selling will be quickly forgotten.

At the time of publication, James DePorre was Long HTGM.