The S&P 500 and Nasdaq 100 exchange-traded fund (QQQ) are chugging along with very solid gains, but under the surface, the action is much more mixed. Breadth is running about 4,700 gainers to 3,100 decliners, which is OK but not great. The Russell 2000 exchange-traded fund (IWM) is up 0.43%, but the number of stocks that are up more than 10% is relatively short for such stock action in the indexes.
The issue is that there is buying interest, but we don't have the same sort of speculative fervor that was driving the action back in January and early February. There isn't any really standout movement in groups like special purpose acquisition companies, cannabis, biotechnology, gambling and so on.
So what's changed? The most obvious difference is that we don't seem to have the same sort of enthusiasm among small individual traders. We have to wonder if the corrective action of the last six weeks has scared them away. Social media is no longer moving stocks as they did, and it is quite obvious some folks were badly burned after the frothy action earlier this year.
Many market participants were looking for the second round of stimulus payments to drive speculative trading again, but that never materialized. That probably had something to do with the chaos created by weakness in bonds, but that money never showed up in the same way the first round did.
Are small traders leaving the market for good? It is difficult to say, but part of what attracted them is the ease of trading offered by apps like Robinhood. That is not going to change, so it will be easy for the small trader to jump back in when sentiment improves.
We have good market action out there Monday, but we are missing the aggressive speculative component that made stock picking so much fun a couple of months ago. We'll see if it reignites, but while we wait, we have to be cautious about chasing.