All of the major indexes ended the day with losses, but what was most notable was how they all failed to reflect how bad it was for many stocks.
Small caps and sectors like biotechnology, gambling, cannabis, and other favored names from a couple of months ago, are trading like they are mired in the depths of a bear market. Breadth was around 3,150 gainers to 4,700 decliners, which is poor, but it was the extent of the drops that were more significant than the breadth.
Most analysts seem quite confused by the action. On one hand, the S&P 500 and Dow Jones industrial average look downright frothy, but the action in many individual stocks is putrid. There is no simple way for this great inconsistency to resolve itself.
The social media traders that enjoyed great speculative trading two months ago are suffering the brunt of the damage, while many of the low-beta big-caps are becoming extremely overbought. The indexes look like they are unsustainable, while many individual stocks are down 50% or more from their highs. Only around 55% of stocks are currently over their 40-day simple moving average, while SPDR S&P 500 exchange-traded fund trust (SPY) and the SPDR Dow Jones Industrial Average ETF trust (DIA) are extended far above that level.
The one great certainty about the stock market is that conditions will eventually change. There isn't much to do right now, but wait to see what develops. This is a terrible trading environment currently and the fact that the senior indexes don't fully reflect that fact makes it only worse.
Have a good evening. I'll see you tomorrow.