The most bullish thing about the current action is that the "stealth" moves have ended. No longer are the indexes and a small group of big caps names covering up a very unhealthy market. There is still a wide gulf between the winners and the losers, but it has narrowed. Market sentiment is now more reflective of the reality of the average stock, and that will help the correction process to advance and eventually end.
In bear markets, fundamentals and valuation tend to be ignored, especially in small-cap stocks. There has been underperformance in groups like cannabis, growth (ARKK) , biotechnology, de-SPACs, and small caps for nearly a year, and there still is little interest in the stocks offering the best "value." This is due in large part to computer algorithms, sector exchange-traded funds, and institutional flows that are selling some sectors in large baskets. These big players don't care about anything other than the sector. A good stock in the wrong sector is going to suffer no matter how good it may be.
I can't recall a time when I have seen more small-cap stocks with strong valuations and growth that are trading in a miserable manner for such an extended period of time. The longer it continues, the more discouraged investors become. They lose faith in the stock and in the market as a discounting mechanism, but the pendulum will eventually swing, and these stocks will eventually enjoy a day in the sun. The cycle always does eventual turn.
Currently the only buying that is working is when there is a panic selloff. There have been several big bounces recently, but they developed after there was a very sharp dip and sentiment became extreme. There has not been good upside follow-through which means there is no reason to be confident that we have hit bottom.
The hardest thing for many traders to do in this market is to stay patient and wait for better price action. There is a strong inclination to try to catch the exact bottom, and that leads to some quick losses and another failed try. The turn will come, and when it does, it is going to last long enough to allow you to buy strength. You don't have to catch exact turning points to be a great trader.
