A Market for Aggressive Trading, Not Index Watching
Themes and sectors are where the money is being made. Here's where to focus.
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The Nasdaq finally broke its 13-session winning streak with a minor pullback on Monday. Overall, the market held up well with the Russell 2000 gaining 0.58% to a new closing record. The most notable action was strong speculative interest in many stocks.
Iran Can't Derail the Trend
What is most notable about the market action is that the chaotic Iran situation has not derailed a powerful trend.
There will be more news on Tuesday morning when President Trump appears on CNBC at 8:30 AM ET. He has already indicated that he does not plan to extend the ceasefire which expires late on Wednesday. However, the Iranians are now expected in Islamabad for negotiations with Vice President Vance and his team.
Oil is slipping on the news as investors remain hopeful that a resolution is coming.
Watch for Sell-the-News
The main thing we have to watch for right now is selling into good news. Conditions are ripe for profit-taking to trigger a sell-the-news reaction. Another "war is over" headline that looks like the real thing may be the event that triggers a short-term top. However, don’t expect this market to suddenly collapse. It my need some pullbacks and consolidations but underlying support is extremely strong.
The AI Capex Boom Is Not Over
It is important not to focus too much on the indexes. There are many things going on under the surface that have little to do with Iran or global events, and they are driving the market.
A good illustration this morning is AI capital spending, which has been driving the market recently. Amazon (AMZN) announced it will invest an additional $5 billion in Anthropic and could invest up to $20 billion more over time. The stock is trading up 2.7% pre-market but more importantly this is an illustration of how the capex boom is far from over.
Themes, Not Indexes
If you want to make money in this market then your focus should be on themes and sectors and not the indexes. The media and many pundits are obsessed with trying to time the top tick in the indexes and they are missing the strength in areas like AI capex and infrastructure, data center power, space, biotechnology, and small caps in general.
A Market for Aggressive Trading
With earnings season heating up, some strong speculative trading in smaller stocks, and good themes, this is a market for aggressive trading rather than micromanaging of the indexes. If you stay focused on stock picking the market looks quite different than if you are only looking at the indexes.
Related: Near All-Time-Highs, but It's Not All Puppies and Rainbows
At the time of publication, Rev Shark had no positions in any securities mentioned.
