There are two basic types of market environments -- those that favor stock-picking and those that don't. Markets that don't favor stock-picking tend to be focused more on macro issues, rotations, and overall timing. Fundamentals and chart patterns of individual stocks become less important when market timing dominates.
The recent action has been a good illustration of this. Stock-picking was well rewarded until around the middle of February, when bonds started to come under pressure. When bonds become a bigger issue, market timing and macro considerations started driving the action, and the stock-picking action dried up.
Typically, strong markets are driven by stock-picking, and weak markets are driven by macro concerns and correlated selling. That isn't always the case, but as we've seen in the past couple of weeks, holding a small-cap stock with good fundamentals didn't offer much protection. They were all sold regardless of individual merit.
The best indication that the market is starting to improve after a corrective phase is better stock-picking. When fundamentals and charts start to matter, it helps produce positive momentum. Good stock-picking tends to reinforce itself and, if it lasts long enough, it will eventually lead to fear of missing out.
Stock-picking has been very poor lately as all the hot speculative sectors have suffered severe corrections. SPACs, cannabis, and gambling are struggling. There are good arguments for why they should bounce back, but quite often, new leadership develops after a corrective phase, so it's important to be open-minded and focus on price action.
As the quarter comes to an end and some of the rotational action stops, I expect to see a return to stock-picking, but it is important to make stocks prove themselves before you put too much cash to work.