The month of July ended with a bang for the stock market with big-cap technology stocks ramping into the finish line. The biggest stock in the market, Apple (AAPL) , hit a new all-time high with a surge of over 10% but that covered weakness in thousands of smaller stocks that did not participate in the move.
Breadth on Friday was around 2700 gainers to 4600 decliners as the Russell 2000 small-cap index lost 0.94% compared to the Nasdaq 100 (QQQ) which gained 1.78%.
It is not only a few big-cap names that are leading. There are also pockets of speculative action that are constantly shifting. The phenomenon of the Robinhood day traders is not showing any signs of slowing. That action has an impact on overall sentiment as aggressive professions play the game as well and cause movement in small secondary stocks.
There is an odd barbell of action with big cap leadership from Apple and a few others on one end and the wild speculative action in dozens of 'junk' stocks on the other end. In the vast middle, there is a mishmash of action and rotation. Precious metals have been a standout and there is some interest in 'value' stocks such as financials and industrials but it is not sustained the rotational action reverses quickly.
Ideally, there would be a rotation out of some of the bigger cap leadership and into the lagging secondary stocks but the problem is that when the big cap names lag that negative sentiment tends to hurt the broad market. Money doesn't easily flow from an Apple into something else. If it comes out of Apple it is likely heading for the sidelines.
For a while now this has been a market that has rewarded stock picking over market timing. The indices continue to frustrate those that keep looking for some deeper corrective action to occur. On the other hand, the opportunities in individual stocks have been robust but they requite active management and aggressive trading. It is very easy to be caught in sudden reversals in junk names like Kodak (KODK) if you aren't fast enough.
There are hundreds of earnings reports hitting this week which should continue to reward stock pickers over market timers but we need to watch what happens with the Nasdaq 100 as it becomes more extended. Market players are still chasing the QQQ and we have to wonder how much longer that can last.
My game plan has been the same for a while - stay focused on individual stocks and don't spend much time on trying to time the indices. When the indices do correct, it is likely to be in the form of rotational action, so if you are in the wrong indices you will be in trouble.
We have a mildly positive open on the way as the market continues to ignore most news flow.