The market is acting poorly again. The indexes are down sharply, with the Nasdaq dropping 1.75%, breadth is more than four to one negative, and the number of stocks near 12-month lows continues to expand. There are few signs of support, and dip buyers look like they aren't even going to try very hard.
The good news is that the indexes and big-cap stocks are finally starting to close the gap with all the other stocks that have been correcting for nearly a year. Quite a few stocks topped out in February 2021 and have been in a downtrend since then. While that was occurring, the indexes kept hitting new highs, and the media totally ignored the two-tiered nature of the action.
It took a hawkish Fed, but now the media is finally starting to see the weakness. It is hard to ignore when big-cap leaders like JPMorgan (JPM) , Goldman Sachs (GS) , Home Depot (HD) , Salesforce (CRM) , and Amazon (AMZN) are substantially off recent highs. There is still a big gulf between big caps and many small caps, but it is closing, and there are some fledging signs of strength in the worst stocks.
I've often written that bad markets don't scare you out; they wear you out. The disgust with this market has been building since it is no longer possible to hide in a few big-cap names. There is still some ok action in energy, but financials lost their luster, and the selling is now more correlated and less rotational.
I don't try to call market turns, but with the weakness in big caps progressing, there is some light at the end of the tunnel. We will still have to deal with interest rates and inflation, but it is being discounted by this market, and there are a growing number of good stocks with earnings that are looking increasingly attractive.
(Amazon is a holding in the Action Alerts PLUS. Want to get an alert when the portfolio makes a trade, click here.)
