A Day of Rest? Bitcoin Will Have None of That
Despite some some profit-taking Tuesday, I'm sticking where the momentum is. But here's what we really need now and the one thing that could derail this market.
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After a terrific run, the market succumbed to some profit-taking on Tuesday. Small-caps were hit the hardest with a loss of 1.75% as some money rotated back into the Magnificent Seven MAGS names and pushed the group to a 0.2% gain. Tesla TSLA, which has recently been a standout, gave back 6%.
Although it is one of the most extended areas of the market, Bitcoin IBIT managed an additional gain of 2.5% after some early weakness. The sector is going parabolic, and I’m going to try to stick with the strong momentum for as long as possible.
While many of the stocks that have been the strongest lately suffered the biggest losses, the action wasn’t bad enough to cause any major technical damage or shift the trend. There were over 600 names making new 12-month highs, although breadth was around three to one negative.
Dip buyers showed up following a sharp drop around midday, and the indexes closed well off the early lows. While many names just need some rest and consolidation, what would help most is a little more worry and less bullishness.
Stocks often climb a wall of worry, but there has been very little concern about the economic situation or valuations. One issue Tuesday was the weakness in bonds. The odds of Fed rate cuts continue to contract, but that is being more than offset by optimism about economic growth. One thing that could derail this market is signs of a rebound in inflation, but that isn’t happening, although interest rates have been trending higher.
Conditions are still good for stock picking, and a further pullback and consolidation would make it even better.
Have a good evening. I’ll see you Wednesday.
At the time of publication, Rev Shark was long IBIT.
