It has been an exceptionally strong week for the indexes, but the action took an interesting turn on Friday as some sharp rotation took place. Big cap winners like Apple (AAPL) and Amazon (AMZN) reversed, precious metals and miners took a hit, and some of the big cap "growth" stocks reversed. The money that flowed out of those groups moved into small caps like the Russell 2000 fund (IWM) , financials like the Financial Select Sector SPDR Fund (XLF) , and the industrials like the Industrial Select Sector SPDR Fund (XLI) and other "value" names.
The best thing about the action was that breadth was 3,950 gainers to 3,400 decliners, even though the Nasdaq 100 (QQQ) suffered a loss of around 1.1%. It is a very healthy sign when investors are willing to rotate out of more expense sectors and into other stocks that are not as extended.
There continues to be very healthy speculative action in small stocks and there is good underlying support overall. While there are concerns about valuation and extended charts there isn't any rush for the exits. The reaction to some of the earnings reports this week signaled an inclination toward 'selling the news' but it didn't have an impact on the overall market.
One issue helping the market is anticipation that Congress will work out a fiscal stimulus fairly soon. While there is the usual political posturing, President Donald Trump has indicated he may act using executive orders, which may force the issue. If a fiscal deal is made, the bears will be looking for some "sell the news" action but this market has already shown how much it loves additional liquidity.
It is a very chaotic environment but one that continues to offer opportunity.
Have a great weekend. I'll see you on Monday.