This morning is another example of the market's recent inconsistency. Although volume was light on Friday, the indices acted well and the bulls were looking for some follow-through. The market is not overbought and there isn't any major news so some continuation of the bounce was logical. However, the pattern lately has been alternating days of strength and weakness. Today it is the small-caps that are lagging while the S&P 500 and Nasdaq 100 ( (QQQ) ) have bounced after early weakness.
Breadth isn't terrible with about 2,600 gainers to 3,800 decliners but retail is taking another big hit and biotechnology is a little weak. The FAANG names are holding and stocks such as Nvidia (NVDA) and Amazon (AMZN) are gaining some momentum. It is rotation into tech and out of retail and some other groups.
Amazon's Prime Day is hitting the retail sector quite hard. A good example is Costco (COST) . Although many don't think the Amazon/Whole Foods deal is that big of a negative for Costco, it has caused increased scrutiny of its valuation. The company has single-digit top- and bottom-line growth but trades with a trailing P/E of about 28x. That multiple is being contracted as retailers are being scrutinized.
I have quite a bit of idle cash on hand and am trying to put some to work but it is not easy. Recent IPO ShiftPixy (PIXY) is one I want to continue to accumulate. My Stock of the Week is Lumentum Holdings (LITE) is down today despite a buy target over the weekend. The optical sector is one that I plan to watch closely.
Alibaba BABA remains my favorite among the large-cap technology names and there are several other small stocks I'm keeping an eye on, including Health Innovations (HIIQ) and Yatra Online (YTRA) . With earnings season starting soon there should be improved action for astute stock-pickers.