We have some follow-through to Monday's strong momentum, but it is being tempered by a rotation out of FAANG names, technology and biotechnology and into financials. The Nasdaq 100 ETF (QQQ) is lagging because of weakness in Apple (AAPL) , Alphabet (GOOGL) and some other big caps but the Russell 2000 ETF (IWM) is outperforming because of strength in small banks.
Financials are the largest group in the small-caps indices, which is why small-caps seem to be acting contrary to the broader market.
There continues to be a bid under the market as the dip buyers are still waiting for an opportunity to buy some weakness, but there is lackluster action in many of the stocks that were strong yesterday. That lack of sustained momentum is what is preventing this rally from really gaining some power.
Many bears are still trying to catch a top in this market, but it is still premature to press the short side. The indices need some lower lows before it makes sense to build up indices shorts. I'm holding an index short, but will not add anything to it until we see some significant red on the screen.
There are some individual stocks in the technology sector that are of interest, such as Extreme Networks (EXTR) , Ultra Clean (UCTT) and Himax (HIMX) . They are on my radar, but they aren't ripe for additions at this point.
Markets acting like this tend to stay sticky to the upside. There is a strong inclination to keep anticipating a reversal, but action like Monday's creates strong underlying support. You may not want to chase stocks here, but shorting them is probably an even worse idea.