After testing some key technical support levels on Friday, the market has regained its footing and put together a healthy bounce, while there is some rotational action taking place and indications that a new crop of leadership is emerging.
The S&P 500 is looking for gains for the fourth day in a row Wednesday, but the reaction to the Federal Open Market Committee (FOMC) at 2 p.m. ET will likely determine how the indices finish. No major policy change is expected and with the recent shift in the way the Fed views inflation now in place, there should be no questions about ongoing dovish monetary policy. As long as Fed Chair Jerome Powell continues to reassure the market that the central bank will continue to do whatever is needed to navigate the economic fallout of Covid-19 then the market should remain relatively sanguine.
While the Fed is likely to help provide support, there are still some interesting shifts occurring in the market. Most notably the FATMAAN names have lost some of their luster and there are now some new groups of stocks acting as leaders. Investors Business Daily notes that stocks -- particularly technology names -- in the $10 billion to $20 billion market-cap range are now seeing increased interest.
Also, as I've been discussing, there has been very good trading action in groups such as SPACs, biotechnology, gambling, electric vehicles, and some speculative small-caps. One thing that has shifted is that the low-priced junk names are no longer attracting the attention they once did and we are not hearing nearly as much about Robinhood traders. This is due in part to the fact that Robinhood trading data is no longer being published publicly but there is also a shift in the focus of those traders as well.
My message continues to be to stay focused on stock-picking and the rotational action between sectors. It is actually quite healthy that the market's reliance on the FATMAAN names has been dropping. However, the big-cap names will still influence sentiment and cause some volatility that can make trading more challenging.
The market loves to love the Fed and those that anticipate a "sell the news" reaction are often disappointed. We will see that happens as the Jerome Powell show becomes the focus.
I'm sticking with stock-picking and ignoring the anticipatory bears.