The question that everyone wants answered is whether the worst of the selling is over.
We never know for sure until after the fact but there are some glimmers of hope in small-caps. I discussed this Monday and there is a continuation of the theme Tuesday. Small-caps are seeing relative strength and many of the names I follow have been holding up while the bigger-cap and FAANG names have been breaking down.
This market correction started with relative weakness in small-caps so it is logical that they would be the first group to bottom. The problem is that the large-cap weakness keeps many buyers on the sidelines.
I have discussed many times how I studiously avoid calling market tops and bottoms. I focus on stock-picking. When the stock-picking goes bad then I raise cash. When it improves I do more buying.
Stock-picking has been terrible for a few weeks now but with the small-caps finding some support it is looking slightly better. There is still much work to do for charts to improve but it is a good start when they stop going down.
While I continue to hold a high level of cash, I am doing a little more nibbling. One new buy today was DryShips (DRYS) , which has been a bit of joke because of the huge number of reverse splits it has done over the years. This morning the company actually put up a very solid earnings report and is in good technical position to attract some buyers.
DryShips has made some very big moves in the past and this time there actually is some fundamental support for a buy. The company saw revenue growth of 66% and earnings were well above expectations at $0.07 per share. It is still tough to trust management but DRYS is not a bad-looking chart here.
There are other names I like, such as recent stock of the week picks NII Holdings (NIHD) and ENDRA Life Sciences (NDRA) , but it is foolish to have confidence in sustained momentum in this market right now. If you want entries, you have to move slowly and be incremental.
The risk of another big-cap, FAANG selloff is still quite high and that will make the stock-picking very tough again. Be patient.