The positive stock picking and speculative trading that started on Monday -- when the Russell 3000 list of additions was released -- fizzled out on Wednesday.
Theme plays like "de-SPACs," biotechnology, memes, and short squeezes were working well on Tuesday, and there was some follow-through action to start the day, but the selling pressure picked up as the day progressed. At the closing bell, breadth had dropped to 33 to 45 negative, and only a handful of stocks finished the day at intraday highs.
Part of the blame went to the upcoming consumer price index report, which is due on Thursday morning, but bonds showed little concern about the number. Once this report is digested, I expect to see the trading action perk up once again.
The other issue that likely impacted the market today is that the pain of the top in speculative stocks that occurred back in February is still relatively fresh. Many small traders gave back very sizable gains and are not anxious to have that happen again. The idea of "diamond hands" was proven to be a trap, and now there is a much greater willingness to take some profits when there is an opportunity to do so.
The reversals today caused some pain for traders who were feeling pretty good after the action to start the week, but the market really needs a "wall of worry" if we are going to see some sustained, positive technical action. The social media traders mess up position trades as they move stocks in a chaotic fashion. If your time frames are very short, there are good opportunities, but if you are trying to build some longer-term positions, the increased volatility in hot names makes it much more difficult.
We will see how the market reacts to the CPI numbers in the morning. I expect "hot" numbers, but we are going to hear the word "transitory" quite a bit.
Have a good evening. I'll see you tomorrow.