The S&P 500 gapped down this morning, bounced, and now has undercut the early lows. While all the indices are negative and the charts look poor, some positive trading activity is taking place under the surface again.
The short squeeze trade has been a significant distraction as much money and attention have rotated into these fundamentally flawed names. Today there are some signs of rotation back into SPACs, EVs, cannabis, and other names that were favored before this short squeeze trade sucked up all the oxygen in the market.
What is most important about this market is understanding which themes are driving the action. Because of its popularity right now, the Wall Street Bets discord chatroom has helped to popularize some key themes and sectors. These change very quickly, but here is a summary of some of the recent themes that have come from that environment:
The themes are shifting very quickly and we fall in and out of favor on a daily basis but if you can track the flow you will be in good position to find stocks in the best sectors.
This is what this market is all about right now. It isn't about the indices, headlines, valuations, or even charts. It is finding the themes that are working and trading them aggressively.