There is some deceptive market action today. The Dow Jones industrial average is trading up 200 points, or 0.75%, and taking out the 27,000 level for the first time, but breadth is running 3 gainers for every 4 losers, and the iShares Russell 2000 Index (IWM) exchange-traded fund is down 0.4%. This sort of action is what happens when there is a rotation taking place. Money is shifting to a narrower group of big caps, which is likely due to allocation decisions by large pension plans that are reacting to the Fed. This is primarily about gaining market exposure, rather than picking stocks.
Markets going up like this one has recently don't typically fall apart suddenly. They consolidate and correct through rotations in and out of groups and sectors. Small caps have been lagging badly for a while now, and still aren't anywhere close to the highs that they hit in August 2018. The other indexes are all in new high areas. It has been a market that has favored big caps for a while, which is what happens when the focus is more on allocations and exchange-traded funds, rather than stock picking.
As we enter earnings season, there will be more focus on the action in individual stocks and that will likely lead to more rotational action. The opportunities in this market won't be index direction, but rather sector choice. We will see next week if banks might have what it takes to be leaders.
I am waiting for the market to sort itself out right now and am not doing much. My Stock of the Week, Personalis (PSNL) is perking up nicely and looks promising into initial coverage from underwriters, which will likely occur early next week.
The S&P 500 is back to opening highs, but breadth is lagging. This is index-driven, rather than stock-driven action.