Idiosyncratic behavior is really continuing benign overall action as the S&P has shown for weeks. Frustrating as this is, and counterintuitive to any sort of comfort about putting money into the market (aside knowing the Fed remains on the Bulls side), this is clearly 'not' the omnipresent broad strength beyond reason, as so many strategists content that it is. It's up there for sure, but that is not to suggest it can't extend. Too risky to invest in the super-caps now? To my way of thinking yes, but that's not the same as playing the bearish side.

No mistaking reality: it's the concentration of capital into a narrow universe of primarily the same (usual suspects) stocks that have been in-command of the Senior Index and NASDAQ overall since the March lows.

Yes there is stress amidst ever-present froth for awhile now. Of course a level of pullback of more than a couple percent would encourage more optimism as regards the so-called 'post-COVID' era, but even that has been pushed forward to a later date (when people get realistic about when vaccines will distribute in a broad way, 'even if' one presume the near-total efficacy that many have real doubts about.

Yet by the Summer's beginning, you won't have half the population vaccinated yet. However once we get close to that, and/or have readily available antibody therapeutics, both affordable (which means mass-market scalable production) and ideally convenient, people will start mingling and traveling more (they now try doing that it seems, which is why local governments crack down severely).

Hence the question remains: are stocks ahead of themselves? Some are for sure, but others are just vacillating. It's even possible that 'if' the big-caps finally get a shakeout worthy of the term, it might be related to taking some gains 'this year', if holders fear higher tax rates next year. However I suspect some of that concern is either shunted aside, already seen in an earlier minor shakeout period this Fall, or negated by confidence it isn't going to happen given the likely structure of the Congress next year.

So, this remains a unique year bifurcated in many ways, during which since a March low-point, there have been a handful of minor shakeouts, even one in which I was hoping for more of a decline that what we got for the S&P. Thus it has proven unwise to short this market, even when we were ready for 'fades'.

While 'don't fight the Fed' or the trend has remained appropriate, this is now a very expensive market with regard to the super-caps, not so many others.

It has been borderline feasible to get a correction for weeks, and consistently at least a number of prominent institutions or analysts have regularly warned of this. I've pointed-out they have a different frustration: excessive negativity. Certainly we've highlighted a couple of interest specs that almost instantly just became pricey market front-runners, to an extent frustrated to have identified several that seemed well-priced and then went on to 'even higher' levels.

But all of this just reflects the disconnect, with 'trend-following' money paying up for the 'what's works' stocks, and ignoring the rest. Or until they're in-play. On the upside you have stocks like Moderna (MRNA) (that I thought expensive at 65), and it's way higher. Or Luminar (LAZR) (that I thought a speculative risk worth taking for some traders at 10 and 13 or even 15's as a 'SPAC', but not now that it ran to 40 on a slew of hype), or Velodyne Lidar (VLDR) (that I spoke of late last week as more of a value-play for Lidar than Luminar which is sort of discounting years ahead by comparison), but even VLDR took-off today. (If you got either great.)

And sure, all that is 'froth', but also it's sudden recognition. The media pundits like Luminar better than Velodyne, but at the same time I viewed the latter as having less relative risk, but at the moment all are catching strong bids. Even often quiet LightPath (LPTH) suddenly springing to life, as I have been suspecting it would after consolidating (if it behaves like others, I guess it will be in the high 3's or 4's before long at this pace). Today was over a million shares in LPTH, that's the second high (for it) volume in two weeks. Might be starting a run-up.

Now there are exceptions to the 'too high' argument, which should correct, but not tank. One might be Apple (AAPL), which is doing better than generally accepted, as well as effectively becoming a leader in processors with the M1 (which is a reason for Intel's decline, although the coming of more-powerful processors in the 'M' category of ARMS-licensed Apple silicon, was already known). For yet another similar situation our Advanced Micro Devices (AMD). AMD was our 2019 pick of the year, from right before Christmas of 2018 at 16-17, but alerted as a prospect months earlier from IFA (tech show) in Berlin which I saw their new capabilities. So now it's in the 90's, our extended target. But of all the big-caps it remains in a good position to move even higher in 2021.

If you have both a resurgence in those techs that really are doing well, and an increase in new technology (or companies properly focused on modern shifts, as they realign their businesses to be on the right footing) you get corrections, from time-to-time, but not catastrophes, and that's been my contention.

Now there are exceptions to the 'too high' argument, which should correct, but not tank. One might be Apple, which is doing better than generally accepted, as well as effectively becoming a leader in processors with the M1 (which is a reason for Intel's decline, although the coming of more-powerful processors in the 'M' category of ARMS-licensed Apple silicon, was already known). For yet another similar situation our Advanced Micro Devices. AMD was our 2019 pick of the year, from right before Christmas of 2018 at 16-17, but alerted as a prospect months earlier from IFA (tech show) in Berlin which I saw their new capabilities. So now it's in the 90's, our extended target. But of all the big-caps it remains in a good position to move even higher in 2021.

If you have both a resurgence in those techs that really are doing well, and an increase in new technology (or companies properly focused on modern shifts, as they realign their businesses to be on the right footing) you get corrections, from time-to-time, but not catastrophes, and that's been my contention.

(Actually the solar flare story was a couple days earlier, but interesting. Just imagine the world of EV's and if power goes out, nothing will work..at all.)

~

In-sum: although forewarning of rising risk for S&P and NASDAQ building to having at-least a shakeout, it's not yet a 'breaking point'. Today's was not that, although one looms, short-term. As you're already seen, S&P can stay overbought for a long time, and shakeout doesn't mean actual 'trend reversal' which many will argue immediately on a down day (you had that this morning even, despite NASDAQ being mostly up while the S&P and DJIA were down).

Despite protestations from a crowd of technicians and analysts calling 'doom' for months, these shuffling moves are more like risk-mitigation these last few weeks of 2020 given concerns about another drawdown in stocks, while the super-cap primary leaders repeatedly get pushed to records, although here and there you see new life in next-generation stocks.

I think that's true not only for conventional technology alone, but also those so likely to benefit from enterprise Ai, AR, Lidar, broader infrared,or incidentally 'real world' business and network 5G which is barely starting to rollout globally as opposed to new device owners who 'wish' they had immediate benefits.

Bottom-line: in a sense this transition to new technologies reaching not yet a critical-mass stage, but at least recognition of the changes, beyond just EV being focused on, are part of unique cross-currents that cause sector-shifts and tax change concerns at the same time this time of year.

Add to that, the Harris/Biden Administration will be focused more on Climate Change and adjusting infrastructure to these shifts in different ways (beyond energy by the way). It's not a question of endorsing or not, it's the reality of at least a good part of the focus likely ahead.

Bottom-line: in a sense this transition to new technologies reaching not yet a critical-mass stage, but at least recognition of the changes, beyond just EV being focused on, are part of unique cross-currents that cause sector-shifts and tax change concerns at the same time this time of year.

Add to that, the Harris/Biden Administration will be focused more on Climate Change and adjusting infrastructure to these shifts in different ways (beyond energy by the way). It's not a question of endorsing or not, it's the reality of at least a good part of the focus likely ahead.