The major indices often make it difficult to see when there is corrective action taking place in key sectors. We have a good example today as money rotates out of groups that have been leaders recently such as FAANG names, biotech, precious metals, and technology. The money is flowing into banks, industrials like General Electric (GE) , and other laggards that are mostly considered 'value' plays.
With the DJIA currently trading up around 0.8% it looks like a nicely positive day but under the surface the Nasdaq 100 (QQQ) is taking a bit again and the iShares Nasdaq Biotechnology Index Fund ETF (IBB) is down 2.25%.
The bulls are hoping that banks and value plays will emerge as new leadership and keep the indices running higher but that typically is not the way it works. Value plays seldom lead for long and are much more likely to produce relative outperformance in poor markets rather than strong markets.
I don't like this action and my inclination is to protect gains in biotechnology and other strong plays recently like Sea, Ltd (SE) and Schrodinger (SDGR) . I keep small 'tracking' positions in these sorts of names but I have sold the bulk of my shares.
I'm raising my cash level and am more cautious. While this rotation action may fizzle out and the old leaders may come back quickly, I'm going to increase my flexibility and see what happens. There is nothing much on my buying radar right now.