Signs of Speculative Interest Building, But Middle East Risk Holds it Back

NYSE Trader

The indices are in positive territory with the Nasdaq 100 (QQQ) up 1.1%, but that number understates what is happening.

Breadth is running at about 70% positive, the Russell 2000 (IWM) is up 1.5%, and in my own holdings only four names are in the red. The buying is broad.

This action tells me that speculative appetite is building, for now. Traders are not looking for safety, they are looking for gains and trying to identify the fastest movers. In that environment, relative strength and breakouts are what work. Beaten-down names are finding some support but are not yet developing new trends worth trusting.

What I'm Buying

A couple of names I added illustrate the focus on strength rather than bottom fishing.

GigaCloud Technology (GCT) has been forming a high base since a strong earnings report. GigaCloud is a B2B platform specializing in global trade of large-parcel goods including furniture, home appliances and fitness equipment, with a logistics and warehousing network built for heavy and bulky items. It trades at a low multiple with strong revenue and earnings growth last quarter.

LightPath Technologies (LPTH) has been trading in a range since a January pullback but has held up well relative to the broader market. LightPath Technologies is a vertically integrated provider of optical components and infrared imaging solutions that has been moving from component supplier to higher-margin integrated camera systems. The company uses a proprietary non-germanium material called BlackDiamond, which has strategic relevance as the U.S. government works to reduce dependence on germanium largely controlled by China. The optical sector is one of the strongest areas of the market right now and LPTH fits that theme.

The TACO Bounce

It is worth understanding what is driving this move. Some traders have started calling this a "TACO bounce," shorthand for the pattern where President Trump relieves market stress with positive comments when conditions get too negative. There is now a consistent enough pattern that some hedge funds have built a TACO index around it, specifically watching for when treasury yields spike as stocks fall, which appears to be the threshold that prompts action. Several funds have reportedly made significant bets ahead of scheduled Trump appearances based on exactly this dynamic.

We need to consider that context in our timing. This move is just a reaction to Trump at this point as the underlying situation has not changed enough to support a new uptrend. The Iran risk remains elevated and oil is still the key variable. What has changed is that some of the immediate pressure has eased and the situation appears to be moving into a different phase. That is progress, but it is not clearance to get aggressive.

My approach for now is to stay focused on names showing relative strength while I let other setups continue to develop.

At the time of publication, DePorre was long GCT and LPTH.