Technical conditions are pretty good as we head into the news with the S&P 500 in the same place it was at a week ago after some choppy action. There still are some extended technical conditions in the large-cap area, but it is better than it was a weak ago.
More significantly, there was a shift in small-cap action last week. After struggling for almost two months many of the hardest-hit small-caps found some support and turned up. Biotechnology, special purpose acquisition companies (SPACs), gambling, solar energy and other speculative favorites looked much better at the end of the week, but many of them are still broken and dealing with overhead resistance. The Russell 2000 looks set to open at its highest level in a month.
The thing that has been most notable about this market recently has been the rotation and two-tiered nature of the action. People who focus on big-caps and the major indices are concerned about overbought conditions and extended stocks. People who focused on small-caps and individual stock picking have been struggling with a bear market and feeble action in the names that were leaders until mid-February.
The key this week is going to be the reaction to earnings news and whether this creates more rotation or acts as a catalyst for the broader market. Many small-caps have been disconnected from fundamentals recently, but earnings may help to shift the focus.
We have a mild open on the way, but I see signs of stock-picking interest. Bitcoin-related names are bouncing in the early going, which is a good sign that speculative interest may heat up again. Even SPACs are starting to find better support.