Poor data out of China killed the momentum and FOMO that was building on Friday, but market players are trying to regroup, and there is some mixed action of interest.
One of the key themes that I am watching at this point is relative strength in the groups that have lagged for a very long time.
A good example is the cannabis sector. Many pot names topped out way back in February 2021. For example,
AdvisorShares Pure US Cannabis ETF (MSOS) hit a high of $56 and has been pretty much in a straight line down since then. It is now wallowing in the $14's.
Fundamentals in the cannabis sector have improved for many of the individual stocks, but the political debate has been a major drag and has prevented a good bottom from forming. The pot bulls have been awaiting SAFE banking for months, and there just isn't sufficient political will to drive it across the finish line.
Nonetheless, this is a sector that has been in a bear market for well over a year and is now starting to show some subtle signs of relative strength while the broader market starts to catch up to the downside. That is why MSOS is my Stock of the Week.
Another group that is similar is biotechnology. The biotechnology ETFs topped out in the fall, but the stocks in the sector have been slammed. A very high number are selling below cash. Most of these names are still struggling to move off their lows, but there is some slight relative strength that indicates that they may be closer to a solid low than other areas of the market.
I'm not rushing to build positions, but I am making more incremental buys as the broader bear market develops.
For many months I wrote about the stealth bear market that was occurring in groups like cannabis, biotechnology, and ARK (ARKK) growth names. I'm now watching much more carefully for a stealth bull market in the stocks that have already suffered the most.