We have a partial continuation of Tuesday's action this morning, with the indices covering up some poor action under the surface. Breadth is improved with around 4600 gainers to 2900 decliners, but there are only 50 stocks hitting new 12-month highs, which is a reflection of the vicious rotation and rebalancing action that we have experienced lately.
The Nasdaq 100 ETF (QQQ) , which led yesterday, is lagging today as the 'safe harbor' FATMAAN names are suddenly not so safe once again. While the Russell 2000 ETF (IWM) is better, the bounces on my screen are not very convincing. I don't see any compelling reason to jump in here right now. There are too many market players feeling that they are stuck and are looking for exits into strength.
The biggest positive I see is that the selling has little to do with individual merit. This is index-driven rebalancing and repositioning, and eventually that will lead to a supply of stocks that have been unfairly punished. Eventually, the market will shift back into focusing on stock picking, and that is when we can become aggressive again.
I am not doing any significant buying right now. I'm tracking stocks I like, but they are showing few signs of finding support and even fewer signs that they are ready to regain momentum. The goal in buying dips is not to be the lowest price but to buy when there is the best likelihood of a sustained upside move. Currently, this market is still struggling to find support, and the rotation and rebalancing are making it quite difficult.
Stay patient, and don't be in a rush to deploy precious capital right now. You don't have to catch an exact low to play a bounce. The indices are covering up what is really going on in this market. Don't be fooled.