After the strong and broad market gains on Friday, many investors were ready to celebrate a new bull market. The S&P 500 was on the cusp of a 20% move off its lows, which some folks define as a bull market.
But the market quickly reverted back to the narrow action that has been the most notable characteristic of the market for quite a while now. The day started with Apple (AAPL) moving to a new all-time high in front of its unveiling of some new products, but which triggered a classic "sell the news" reaction at nearly the exact moment the conference started.
Despite the intraday reversal in Apple, the other usual suspects, such as Microsoft (MSFT) , Alphabet (GOOGL) , Amazon (AMZN) , and Tesla (TSLA) , all managed to stay positive, which helped the Nasdaq 100/Invesco (QQQ) to outperform the other indexes.
The biggest disappointment was that the Russell 2000 -- and its corresponding ETF (IWM) -- was unable to build on its very strong Friday performance. It closed the day with a loss of 1.3%. What the market needs more than anything else is broader strength, and that is not going to happen until small caps can produce some sustained strength.
The difficulty that the market faces at this point is that there is a small group of big-cap stocks that are technically extended and then a large group of smaller stocks that have been trading very mixed. Neither group has any compelling catalyst right now to help them generate more momentum.
There is a faction of the market that is celebrating what they believe to be a new bull market, but even the narrow strength is starting to look tired at this point. The intraday reversal of Apple on good news is what happens when stocks become too extended.
We don't have much news flow coming up until the Fed meeting next week, which increases the likelihood of more choppy action in the next few days.
Have a good evening. I'll see you tomorrow.
(AAPL, AMZN, MSFT, and GOOGL are among the holdings in the Action Alerts PLUS member club. Want to be alerted before AAP buys or sells stocks? Learn more now.)
