As the market and various stocks become more extended, the trading action becomes a little more volatile and inconsistent.
It was another solid day for the market, but it was the Russel 2000 exchange-traded fund IWM (IWM) that led to the upside, while the Nasdaq 100 ETF (QQQ) and the FATMAAN names underperformed. The strength in small caps was reflected in breadth that was 5,200 gainers to 2,850 decliners. New highs were solid at 490, and there was a good supply of momentum with the bitcoin mining plays running very hot and even some China junk names seeing some interest.
The rotation was partially triggered by a slump in bonds. Bonds drop when interest rates rise, and those higher rates typically weigh on the high price-to-earnings growth names, because they are more sensitive to the discounting of future earnings to present value.
Nonetheless, it is healthy market action as the shifting sector strength helps to deal with overbought condition. There is plenty of healthy speculation out there, and we saw a few signs of dip buyers. Some folks are growing nervous by how quickly some stocks have become extended, but the "climb the wall of worry" dynamic combined with FOMO -- fear of missing out -- is what keeps rallies like this running.
The good news is that the focus is on stock picking.
Both Tesla (TSLA) and IBM (IBM) are trading lower on their earnings reports, but Tesla has had a big run-up, and IBM is a serial disappointment. There is a slew of reports coming up in the next few days.
Have a good evening. I'll see you tomorrow.