Negative Market Narratives Aren't Gaining Traction - Yet

A positive week for the indices ended on a mixed note as options expiration caused some random movement. Breadth was 3,000 gainers to 4,375 decliners with the Nasdaq leading the action.

There were two primary themes at work this week. The first was a steady increase of Covid-19 cases with record levels being hit in states such as Florida and Texas. Despite the news, there was consistent dip-buying each time another headline hit. Market players don't seem to want to embrace the narrative that things are getting worse and may cause another economic slowdown.

Apple (AAPL) announced it was shutting down its stores in a few states and that triggered sharp intraday selling. However, dip buyers showed up into the close probably in part due to options games. The news flow is going to provide a very convenient explanation for a market selloff but so far it isn't gaining traction.

The other theme this week was continued small-cap speculation and interest in day trading. Traders are shaking the trees looking for the next big winners and shuffling through various themes such as minority ownership and SPACs. This is helping to keep overall sentiment positive but days like Friday send the message that it may not be quite as easy as it sounds.

I continue to see very interesting technical action in individual stocks and there are things that continue to work. The indices look a bit vulnerable for more of a pullback, but so far it has been a mistake to underestimate the tenacity of the underlying support. Hopefully, the stock-picking action will continue but we have to keep an eye out for more correlated selling.

Have a great weekend and a Happy Father's Day. I'll see you on Monday.

At the time of publication, Rev Shark had no positions in any securities mentioned.