Whatever it was that was plaguing the market early this week has been forgotten as the indices continue the straight-up move that started on Wednesday morning following a panic in cryptocurrencies. The S&P 500 is close to where it started the week after a dip on Wednesday morning that broke the 50-day simple moving average and caused concern that a deeper correction was developing
Not only have the senior indices recovered, but the long-suffering growth and speculative small-caps have shown some relative strength. There has been vicious rotational action out of growth and into value that started back in mid-February, and it looks like it finally came to an end this week. Groups such as biotechnology and electric vehicles are seeing their best action in a long time, and that is shoring up the confidence of stock pickers.
The thing that has been extremely difficult for many traders in recent months is that stock picking in their favored names simply has not worked well. The market has favored big-cap, slow-growth names that appeal to conservative buy-and-hold funds. Traders typically don't bother with names such as Dow Inc. (DOW) , but this week it looks like the action has finally shifted and the speculative favorites are regaining their momentum.
One good example of the shift is the ARK Innovation ETF (ARKK) which holds many high-growth, high-multiple names. ARKK is up 3.5% as of on Friday morning.
This is not the time to be overconfident, but the rotational shift suggests that we will be able to focus more on stock picking going forward. This market has had a number of sudden mood changes lately, and we will need to be on high alert for signs of a shift. Inflation fears seem to have cooled off, which is one of the big positives right now, but that can change fast.