The three senior indices bounced back nicely from poor early action, but the Russell 2000 ETF (IWM) failed to recover very well after a poor start. This underperformance by the small-caps was reflected in poor breadth of close to 3 to 1 negative. It was also evident in the number of new highs, which declined to 220 from more than 1,500 earlier this week.
On my screens, this was some of the worst small-cap action so far this year, but small-caps just don't show up in the indices that well. The group has been on a tear in 2021, so it isn't too surprising that they are finally succumbing to some profit-taking.
Some of the worst action Thursday was in the bitcoin-related names like Riot Blockchain (RIOT) , Marathon Patent Group (MARA) , Canaan Inc. (CAN) , and several others. Grayscale Bitcoin Trust (GBTC) held up relatively well, but the secondary plays were sold hard.
Solar energy, cannabis, EVs, and SPACs all struggled as well. The primary theme in the market has been hot sector action, but that did not work at all Thursday.
The good news is that many of these small-caps are already washed out to a great degree. Those most widely extended were the bitcoin-related names and some of the social media favorites, but there are many that should develop well technically after a few soft days.
The market can undergo a correction in a variety of ways, and it looks like it is occurring now on a rolling basis. While there is no way to know how long it will last or how it will play out, I'm not too concerned about it at this point. If we continue to see some support break in stocks that are not expensive, then I'll be worried.
Have a good evening. I'll see you Friday.