Jim Cramer has a column here on Thursday morning about a topic that I've been writing about for months now. This is a market that favors stock picking over market timing and macro analysis. The business media is blind to what is going on under the surface of the market because it focuses on the indices and a small group of big-cap names and talks to billion-dollar hedge fund managers who depend on macro predictions.
Even during the big pullback that started last Thursday there were some strong pockets of positive trading, with the special purpose acquisition company (SPAC) group being at the top of the list. On Wednesday, when there was a strong bounce, much of the action did not have the typical dead-cat feel to it as many market players were looking for longer-term position trades to build rather than some quick flips.
While breadth was quite poor during the recent drop there was a significant difference in the intensity of the selling. The selling was driven by big-cap technology names in the Nasdaq 100, while the great bulk of the market held up relatively well as it took a much-needed rest.
The time to be concerned about this market is when the stock picking stops working. Back in February, when the market corrected, there were no pockets of speculative action. Just about everything collapsed and there were no safe havens. The current action could not be more different. There are still plenty of good charts, traders are looking to buy dips in favorite names and there are plenty of trades that are working well.
While the FATMAAN names have a major influence on the indices, they are not the market. Most stocks are not strongly correlated with what is going on there, but the big names do impact sentiment and there is less strength when the big-caps struggle.
For months now, my game plan has been to stay focused on stock picking and let the action in the individual stocks that I own help me time the market. That is working very well and I'm going to continue to do what I've been doing.
After the big bounce Wednesday we are seeing a slight pullback Thursday morning as the flippers move to the sidelines. I expect to see the speculative traders look to hot sectors such as SPACs and some select biotechnology names. Don't be fooled by the macro worries. This is a market for bullish stock pickers. It won't last forever, but keep pressing while you can.