The S&P 500 and DJIA are down slightly this morning, but they are covering up some very ugly action under the surface. Many stocks have been bidless recently, and groups like biotechnology and cannabis are in full-fledged bear markets.
What the indices are not reflecting is the number of stocks that are taking very hard hits. Thirty minutes after the open, there were about 30 stocks that were up 4% or more and over 220 that were down 4% or more. Currently, there are only about 12 stocks up more than 10%, and breadth is running 2 to 1 negative.
This action is a good illustration of how liquidity is more important than anything else. When money is not flowing into the market, fundamentals and valuations just don't matter. At some point, there will be great buys, but trying to catch those lows can be extremely difficult.
Given that the Fed is dovish and the economy appears to be on the brink of some of the strongest growth in 25 years, the lack of buying interest is puzzling. However, the market always does its best to confound us. There is concern that the recovery is already priced to a great degree, that interest rates will rise, and that taxes may be a drag, but some of these stocks are exceptional values and should eventually pay off.
For now, I'm just going to stay patient and let this play out. I'll continue to work on shopping lists, but I see no reason to do any significant buyings at this juncture.