Many traders struggled all week as a vicious rotation out of speculative small-caps and high-beta growth stocks and into big-cap growth names gained traction. It was particularly severe on Thursday as the DJIA hit news highs while growth stocks such as those held by the ARK Innovation ETF (ARKK) were struggling with losses of 30% or more.
Aggressive traders have been struggling with bear market action in their favorite sectors like biotechnology, gambling, cannabis, SPACs, and others for over two months now, but this very poor trading has been hidden by the DJIA, which has been in a steady uptrend driven by stocks that individual traders never even look at.
The jobs report on Friday morning turned out to be the catalyst that stopped this rotation, at least momentarily. Growth stocks acted better, and the Russell 2000 ETF (IWM) was the leader. Breadth was very good at nearly 3 to 1 positive, and almost 1,400 stocks were hitting new 12-month highs.
What remains problematic is that some elements of the market are quite extended and in need of consolidation, while other areas have already experienced a bear market and are still fighting to hold support. The two-tiered nature of the action is going to continue to be a primary issue next week as we deal with a slew of reports from smaller names.
It has been a very difficult trading market for many small traders, and the steady momentum of the big-cap driven DJIA only makes it harder.
Have a great weekend. I'll see you on Monday.