The major indices often do a poor job of telling the full story about the stock market, but this week they were unusually deceptive.
It was an extremely rough week for the FATMAAN stocks, which have been the stars of the market since the low in March. The money that has been piling into these stocks suddenly reversed and all eight names suffered some severe technical damage.
Typically, when leadership stocks like the FATMAAN names fall this hard they drag down the entire market. The selling intensifies and many stocks are dumped into bidless action without regard to their individual merits.
That was not the case this time.
Rather than wallow in negative sentiment, market players put their cash to work in new names. It was some of the best rotational action out of leadership names that I can ever recall seeing. While Apple (AAPL) and Amazon (AMZN) were giving back a month of progress, funds were being put to work in SPACs, EVs, biotechnology, and a variety of names that are seldom mentioned on CNBC or in the Wall Street Journal.
It was a classic stock-pickers market as the stocks with the best charts and compelling stories were accumulated by market players that were looking for names that were not extended technically or fundamentally.
If you simply focused on the indices you very likely missed seeing the speculative appetite that existed in many areas of the market. This was not bearish action. It was transitional action and may be an indication that the bull market may not be coming to the end that the bears have been predicting since the Covid-19 crisis started.
We still have to deal with negative seasonality as we await third-quarter earnings in a few weeks but the price action in this market clearly demonstrated that there are willing buyers of good stocks. I expect that to continue regardless of what the indices may do.
Have a great weekend. I'll see you on Monday.