The indices look to start the day slightly flat as some of the strong speculative action starts to cool. However, bitcoin is roaring higher and is setting new records as it blasts through the $51,000 area.
This market has needed some rest and consolidation for a while, but it not likely to take place in the form of a broad and deep collapse. The thing that is more likely to occur is some rotational action, with the most extended names pulling back while market players continue to hunt for good opportunities.
We had the start of some corrective action Tuesday with a slight reversal after a gap-up open and then some rotational action, but under the surface there was still a very long list of individual stocks moving up more than 20%. The momentum winners shifted a bit, but bitcoin-related names and some of the cannabis stocks were quite frisky.
When navigating this market, it is particularly important to think of this as a market of stocks rather than a stock market. The action has not been index-driven in quite a while, and there are still are no signs that stock picking is going away. It will shift, and we have already seen how social media has been unable to sustain some of the momentum in names such as GameStop (GME) and Sundial Growers (SNDL) .
The whole social media movement is reverting to just another form of trading. Traders are finding out they just can't count on the same old stocks to keep moving. It is necessary to constantly find new ideas and then to trade them aggressively. The market bailed out some undisciplined traders, but others are finding out that trading isn't that easy.
The biggest positive right now is that the rampage in bitcoin illustrates the speculative hunger that is taking place. That hunger suggests that individual stock picking will remain strong, but it will be necessary to be far more disciplined and to shorten time frames if you want to profit.
Don't be misled by the indices. They need some rest. The true nature of this market is reflected in the stock picking under the surface. That is what we need to monitor to measure market health.