Let me begin by noting something I have noted here before, but probably bears repeating: I think the speculative stocks have peaked. I think what we saw back in January and February was the sort of action that was highly speculative and unsustainable.
That doesn't mean we can't see speculation elsewhere. It doesn't mean we won't see pockets of action similar to that again. But three months ago we saw what I might term a speculative top. We saw SPACs -- so may special purpose acquisition companies -- become the flavor of the day. Are there really that many great deals out there that we needed hundreds of SPACs?
We saw what now looks like a blow off in many of the electric vehicle stocks. Look at the chart of Blink Charging (BLNK) where the move in November looks extraordinary as it tripled in a week, but it then more than doubled from December through late January. That's speculative. The stock can come all the way down to $25 now, and still not even break the March low, but it looks to me like the best it can do is go sideways now.
Now let's look at the chart of the Consumer Staples Select Sector SPDR (XLP) , an exchange-traded fund for the staples. Boring staples. What were they doing back in the first two months of the year? Nothing but down. Oh, not down that much, around 10%, but down while speculative names were soaring. If that sounds familiar, it's because that's what happened in early 2000. Speculative names flew upward in the first quarter of that year and boring old big-cap stocks went down. I remember the head of Unilever Asia asking me at the time, "why?!"
But this is our either/or market. We can't seem to get all the groups in gear at the same time.
On Monday, all we heard was fretting over the semiconductor stocks. Wait, did you not know there is a semi shortage? Because it's a daily discussion everywhere now. Car companies, appliance manufacturers, you name it, everyone is talking chip shortage.
If we didn't mark a month from the exact beginning to the exact end and just used our eyes, we'd all know the SOX -- Semiconductor Index -- is down 6% from early April. And it made a marginal new low Monday. Yet, it finds itself at an uptrend line (the line actually goes back a few more months than you see on the chart).
Let's say it breaks and tests 2800 (blue support line). OK, so it will have gone sideways since January. Unless or until there is a break of 2800, it is really just one giant sideways.
The point is nothing has changed in the market in months. The indicators are still the same. Monday didn't even move them. It has been an Either/Or Market for months on end. It remains that way.