For the first time since mid-May the indices have seen selling that's lasted more than one day. There have been about 10 one-day selloffs but this was the first time the bears were able to manage a second day of pressure.
That being said, the selloff was fairly mild and breadth was not extreme. What was notable was that it was triggered by a "sell the news" reaction to leading momentum stocks Tesla (TSLA) and Microsoft (MSFT) .
The Nasdaq 100 ( (QQQ) ETF), which is comprised primarily of large-cap technology, suffered the brunt of the damage. These stocks have been the market leaders since the low in March.
Typically, when leadership is part of this sort of selloff it causes highly correlated selling -- but that was not the case this time. There was quite a bit of rotation into small-caps and "value" names, which are not extended or that expensive compared to the "FATMAAN" stocks.
Next week we have a slew of earnings reports that will help to establish the market tone but the big question will be whether we have a resumption in technology leadership, further rotation, or broader selling.
I'm looking for more rotational action to take place as I believe that there still is a good supply of retail traders looking for action. There traders are focused more on volatility and price action and aren't overly concerned about market timing.
The market has been doing for some corrective action for a while and the way this is playing out so far is healthy. The most expensive and technically extended stocks are correcting while money flows into better values and less overbought names. That actually makes sense.
Have a great weekend. I'll see you on Monday.