One of the most difficult aspects of the market in 2021 is that the indices have not reflected the true action in speculative and growth stocks. The S&P 500 and DJIA continue to trend higher, and folks in the business media keep talking about the market's great strength and how stocks don't ever correct.
The problem is that a large part of the market has been correcting and if you dig down a little bit, it is extremely obvious.
A good example is the stocks that are contained in the IBD 50. Investors Business Daily employs a stock-picking methodology called CANSLIM that seeks to identify stocks that have strong revenue and EPS growth along with a number of other factors such as institutional interest, relative strength, etc.
The IBD 50 stocks tend to be growth names, and they attract aggressive speculative buyers. If you want to know if we have a good trading market, then take a glance at the Innovator IBD 50 ETF (FFTY) .
Below is a comparison of the S&P 500 to the FFTY. As you can see, FFTY outperformed through about mid-February, but it has been in a downtrend since then while the S&P 500 has continued to trend higher. If you have found trading more difficult in the last few months, this is why. The stocks that traders favor have been in a downtrend, and it has been covered up by the indices.
There are a number of other groups of stocks that have similarly underperformed, such as biotechnology, and that's causing great frustration for traders wh0 see the business media celebrate the great action in the indices.