The indexes finished the day with minor gains on slightly positive breadth, but small caps lagged, and so did sectors such as biotechnology -- as represented by the biotech exchange-traded fund SPDR S&P Biotech (XBI) -- and high price-to-earnings growth -- as seen in the Ark fund (ARKK) . The trading action could have been much worse in view of the highest consumer price index reading in over 40 years, but it was anticipated and was already priced in to some degree.
This does not act like a market that is ready to move on from inflation and interest rate worries. We are still at a very early stage, and the Fed hasn't even started to raise rates or runoff its balance sheet. There is hope that the inflationary pressures will peak quickly, but that may just be wishful thinking.
Traders have been struggling with this market action for a while, and the disgust continues to grow. The heart of the problem is that fundamentals and technical patterns just don't matter much. It is all about rotation and algorithms, and macro positions. Good old-fashioned stock picking doesn't matter much.
There are some pockets of strength in groups like financials, energy, and commodities, but they are not the traditional momentum groups, and that makes it harder for many traders that are having a hard time switching to stocks that they have never really followed.
This is a tough environment, and it impacts sentiment. We just have to keep on slogging away until conditions shift.
Have a good evening. I'll see you tomorrow.
