The market action Monday is a good illustration of an article I wrote this past weekend entitled: "If You Want To Produce Better Returns Pay Less Attention to the Indices."
The degree to which this applies depends on the manner in which you trade, but despite the lifeless indexes, there is some good stock picking on my screens. Part of that is due to luck, but part of it is an illustration of how good trading action is not necessarily correlated to the indexes. Probably the best example of that now is the strength of bitcoin -- as seen in the Grayscale Bitcoin Trust (GBTC) -- and Etherium -- as seen in the Grayscale Ethereum Trust (ETHE) . Both are on a rampage.
For some reason, the pressure on many of the smaller-cap names has lifted, and they are no longer being sold as money rotates into other areas. The Russell 2000 exchange-traded fund (IWM) is still down on the day, and breadth is negative, but both have improved as traders are seeing that there are some things working.
In my experience, there are two basic types of markets. The first are those that are driven from the top down and are correlated to a large degree. Almost all severe bear markets are seeing highly correlated selloffs where the individual merits of stocks don't matter.
The second type of market is one where picking stocks matters. Charts function like they are supposed to, fundamentals have an influence, and there tend to be some good pockets of momentum. The indices just don't exert much influence in this type of environment.
If you appreciate and understand whether you are dealing with an index-driven market or a stock-picking market, then you are able to focus on the right strategies and be more aggressive. It may not look like it from the indexes, but this is a good day for stock pickers.