The DJIA gained 167 points on Tuesday due primarily to action in just 3M (MMM) and Caterpillar CAT. The broader market was mixed and did very little. It was a narrow advance.
Today we have similar action with the Nasdaq 100 ETF (QQQ) seeing its biggest gain on the year due primarily to action in Amazon (AMZN) , Alphabet (GOOGL) and Microsoft (MSFT) . While the big-cap technology names are on a rampage, the Russell 2000 ETF (IWM) is trading close to even. Breadth on the Nasdaq is actually negative with 1,305 advancers to 1,396 decliners and the biotechnology sector is acting poorly again. (Alphabet is part of TheStreet's Action Alerts PLUS portfolio.)
That is a long-winded way of saying the market is narrow again. It was even worse earlier, but it has perked up as dip buyers put some money to work, but this is not a wild celebration of economic optimism in all phases of the market. There is some fear to chase outside the stocks that are purely earnings driven.
One shift we have seen this week is that we have moved from pure price momentum to earnings-driven plays. That was the case on Tuesday with the Dow and is the case today with the FAANG names.
The lesson is that you have to be more selective with your buying. You will not be bailed out throwing money at just any stock. It has to be a good earnings play in a good sector.
I'm digging for new buys and haven't done too much so far. I added to a position in Alibaba (BABA) , which I think will enjoy some sympathy from the FAANG names, but I need more long inventory and this narrow action is making it more difficult.