The indexes bounced back in the afternoon, but there was plenty of damage under the surface. Amazon (AMZN) , Zoom (ZM) , Apple (AAPL) , and a few other big-cap stocks pushed the Nasdaq into the green, but breadth was nearly three to one negative, and the Russell 2000 fund (IWM) took a hit of 1.5%.
For a while, it looked like growth names and big-cap FATMAAN names might falter, but they found their footing and closed relatively well. There were around 400 stocks hitting new 12-month highs, but that is quite narrow, given that the indexes are hovering near all-time highs.
What really suffered Tuesday were the smaller, more speculative stocks. Biotechnology, gambling, and some of the other groups that went into bear markets after hitting highs in February were the worst performers. Most of the valuations are much better now than in February, but liquidity can dry up fast in these smaller names.
I'm not feeling overly optimistic that the small caps are going to bounce back quickly, so I'm biding my time while waiting for some names to fall further. With earnings season starting soon, there should be some positive catalysts on the horizon.
While this was a poor day for many stocks, I don't expect downside momentum to accelerate, but I also am not looking for a quick snapback. We will need to stay patient and let this corrective action play out for a while longer.
Have a good evening. I'll see you tomorrow.