A little over two weeks ago, the rotation into value stocks and out of growth and speculative stocks started to reverse.
On May 13, the Ark Innovation ETF (ARKK) hit bottom and reversed to the upside. On May 11, the Nasdaq Biotechnology Index ETF (IBB) hit a low and then bounced over its 50-day simple moving average. There are a number of other sectors and individual stocks that also bottomed out about that time.
The bounce action gained some steam last week, but the gap-up open Tuesday morning was a convenient trigger to lock in some gains after a good run. This is just routine profit-taking after a decent run, and it isn't surprising in view of how hard things like ARKK and IBB were hit.
It is too early to be concerned about this action. There is still plenty of support at recent lows, and there isn't the sort of aggressive selling that made the action in March so miserable for many stocks.
If we start seeing some lower lows and limited dip-buying, then we will have to brace for some retests, but that isn't happening so far. Breadth is still almost 2 to 1 positive, and it looks more like a hangover from a long weekend rather than a shift in market character.
I'm doing very little right now, not because the action is poor, but because it looks like it may take a little more time for this corrective action to play out.