After the very poor action last week and a good close on Friday, quite a few traders were looking for some bounce action. The primary view was that sentiment had become extreme enough to produce a counter-trend move, but that it was a bounce and not a bottom.
Traders got their wish with some sizable upside of around 2% in the Dow Jones industrial average and 1.8% in the S&P 500, but the action was mixed and didn't create a strong fear of missing out dynamic. Breadth was around two to one positive, which is solid, but not as strong as generally occurs on a 2% day. Small caps lagged, and growth names like ARK Innovation (ARKK) were in negative territory.
Financials were the big winners today, with JPMorgan (JPM) , Bank of America (BAC) , and Citi (C) gaining around 6%. Also, Apple (AAPL) contributed a large chunk of the move with a bounce of 4%. This was primarily a move in the big-cap names that were hit the hardest last week.
Small caps and secondary stocks were steady, but didn't do much. That is good as far as chart development, but didn't offer much excitement for traders focused on smaller stocks.
Counter-trend bounces of this sort can carry further than the skeptics tend to think, but this was not an energetic move that is going to cause a lot of FOMO. That could change, but at this point, it is just a routine bounce, and there isn't any reason to be very trusting.
The biggest positive that I see is that the number of stocks hitting new 12-month lows continues to drop. There were only about 235 today vs. 3,000 about seven trading sessions ago. That is what a bottom should look like, but this is still a market that has to deal with misleading indexes. Stocks are moving in a rotational manner, and that makes the picture rather murky.
Have a good evening. I'll see you tomorrow.
