Financial television is reporting that the major indexes were close to flat on Tuesday, big-cap artificial intelligence names did little, and it was a lackluster session. They are completely missing the big story, which is the very strong action in smaller stocks.
While the senior indexes did little, the Russell 2000 exchange-traded fund (IWM) moved up an impressive 2.8%, and market breadth was extremely strong, with around 6,500 stocks moving up and about 1,800 stocks moving down.
This action is the inverse of the very narrow big-cap leadership, which has been the primary story for months, and it is an indication that maybe a rotation into the lagging names is starting to gain traction.
Many investors have been complaining about how the big-cap names are too extended to chase at this point, but the smaller stocks are too weak and are lacking positive momentum. The shift today is a step in the right direction, but each time the small caps have shown good relative strength recently, they have fizzled out very quickly.
This action feels a bit different today. There was an increased focus on stock picking. Traders were selective and were focused on good technical setups. This wasn't just a herd of investors piling into the same popular names that they had been chasing for months.
We will see if this action can gain some traction. If it does continue, then it will be the most convincing evidence yet that the bear market is coming to an end. It is still very early, but it is refreshing to see broader strength in the thousands of stocks that have been ignored for so long.
The indexes have been hiding the poor action for a very long time but the story today was that the indexes were hiding some very good action for a change.
Have a good evening. I'll see you tomorrow.
