After three days of aggressive selling, the Dow Jones and S&P 500 managed very energetic bounces right off their 50-day simple moving averages. It was a fairly classic rebound, but there were few new 12-month highs, and breadth was mediocre with about five gainers to every three decliners.
Despite this good action, the rotational action hit once again. Growth stocks underperformed, and many speculative small caps acted quite poorly. ARK Innovation (ARKK) , which is a convenient measure of growth names, was down 2.6%, and the Nasdaq 100 also lagged, but still gained 0.8%.
Ironically, it is the stocks that aggressive traders favor the most that are doing poorly, while those stocks favored by institutions, big funds, 401(k) plans, and so on, are the ones that are doing the best. Speculative liquidity seems to have disappeared to a great degree in equities.
Speculative traders not only struggled with stocks, but cryptocurrencies were roiled on a comment by Elon Musk of Tesla (TSLA) about the environmental damage done by bitcoin mining and news that the Justice Department and IRS are investigating crypto exchange Binance.
There continue to be some very unusual crosscurrents and flows in this market. If you are trading the wrong sectors, it is doom and gloom, while the best-performing things are those stocks that seldom are on the radar of aggressive traders. This past week there were some reversals of the rotational action, and the lagging names actually looked better on Wednesday when the Dow melted down, but the rotation out of growth picked up again today.
It is some of the most severely inconsistent actions that I can recall seeing, and there is no clarity about how it may reconcile itself.
Have a good evening. I'll see you tomorrow.