After a one-day respite, the corrective action has picked up again and accelerated in certain areas of the market, such as software, growth stocks, and small caps. Breadth has been sinking fast and is now more than three-to-one negative, and the number of new 12-month lows has accelerated to around 800.
There is a combination of issues that are causing this weak action. First is concern about the ultimate impact of the Omicron variant. There is a worry that a jump in cases over the weekend will trigger governmental action and cause further selling. There just isn't any great clarity as to this issue.
The monthly jobs report is another potential catalyst. The report had both positive and negative aspects, but worries about inflation are still building. The market is concerned about the level of hawkishness that Jerome Powell exhibited in this work.
A third issue is that very poor technical action. Support levels are breaking, downside momentum is building, and there are no signs yet of rotation into the stocks that have been hit harder. Traders are growing weary of this poor action and are starting to capitulate to a great extent.
As always, this sort of action will eventually produce great opportunities, but the challenge is to time it with some level of precision. Typically traders jump in too quickly out of fear of missing the ultimate bottom. Typically, the better approach is to wait for some positive price action before putting much capital to work. It may not be the bottom, but the goal here is to buy a sustained move higher.
I am working hard to refine a shopping list, but don't expect to do much buying today.