The gloom was so thick on Friday morning that you could cut it with a knife. Many investors were convinced that inflation worries and a hawkish Fed were going to trigger a long-awaited breakdown in the indexes. Even JPMorgan (JPM) , which has been a leader lately, was down sharply on its earnings report.
But, as is so often the case when disaster is anticipated, it didn't happen. Dip buyers did some buying at the open and then returned in the afternoon to take advantage of another dip. Some of the worst-performing groups like biotechnology -- as seen in the biotech exchange-traded fund (XBI) -- had a classic intra-day reversal and closed nicely positive after hitting new 12-month lows. Small caps were green, and breadth went from more than three to one negative to around 3,650 gainers to 4,550 decliners.
It wasn't a huge snap-back rally, but it was pretty snappy in places, and it helped to relieve some of the negativity that has been building among traders that focus on secondary stocks and growth names.
It is premature to declare that the action today was a turning point, but it was a nice step in the right direction. With earnings season hitting this coming week, we may actually see more focus on individual stock picking and less on these crazy sector rotations driven by computer programs.
There are a lot of interesting opportunities out there, especially if we see a return to good old-fashioned stock picking.Have a great weekend. Enjoy the holiday. I will see you on Tuesday