At midday, the Dow Jones industrial average is down over 500 points, and breadth is running around 2,100 gainers to 5,700, but this is some of the most encouraging action we have had for high-beta growth and speculative stocks in a while.
Much of the market has been struggling for three months, and many stocks are deep into a bear market -- that's something I've been yammering about for a while. The biotechnology sector is a good example of a group that has been decimated recently.
What happened Tuesday was that the broader market seems to have suddenly recognized that there are some problems out there. This is allowing the bad news to be fully discounted, and since some stocks have already corrected quite a bit, they are in a position to bounce.
The Dow is finally starting to close the gap with all the stocks that have been suffering for months, and that is a relief, even if it doesn't mean that all the crazy rotation is suddenly going to reverse.
I don't want to sound overly optimistic at this point, but the action in things like biotechnology, the Russell 2000 fund (IWM) , and ARK Innovation (ARKK) indicates that the gap-down open this morning may have been at least a partial washout. If we continue to see relative strength in these areas of the market as the Dow corrects deeper, then we are in good shape going forward.
The rotational action recently has been some of the most extreme that I have ever seen. The market is finally starting to recognize that and is working now to close the gap between the leading and lagging groups. It will be a bumpy ride, but it is a good start, and I'm looking to add some long exposure as things progress.
One name I'm adding to today is Enthusiast Gaming (EGLX) , which reports earnings Wednesday after the close. In view of the positive response that Roblox (RBLX) has had to its report Tuesday, I suspect that it will be a strong report.