The S&P 500 has been on a record-setting run recently, and many market players have been waiting for some sort of catalyst to trigger some profit-taking. It finally occurred this afternoon in the form of the Coinbase (COIN) initial public offering.
The Coinbase IPO had all the necessary elements of a frenzy, such as predictions that it would more than double in the very short term. It is a way to play the red-hot crypto sector without actually have to find a way to buy cryptos.
When the stock opened strongly and then quickly took out the opening levels, it triggered profit-taking not only in the crypto sector, but in a wide number of other stocks that have been performing well lately.
The good news is that small caps finally managed to outperform, with the Russell 2000 fund (IWM) gaining almost 1%. Breadth stayed positive also, despite the late fade in the senior indexes. It ended up just being another example of how much the market is impacted by rotation lately.
It was the first time small caps and groups like biotechnology have exhibited some relative strength in a long time, but it doesn't fully address the bigger question of whether small-caps can hold up if the S&P 500 corrects deeper.
I do think some of the small caps are finding support now, but It is going to be a very bumpy ride for a while, especially as we head into earnings seasons.
The COIN IPO turned out to be a bit of a dud, but that may be what the market needs to reset and build the foundation for a bounce in the lagging groups.
Have a good evening. I'll see you tomorrow.