After weak action in China overnight, selling pressure has picked up this morning but so far it remains contained and is mainly hitting FAANG names and the Nasdaq 100. Breadth was extremely strong yesterday but it has reversed today and is running around 2000 gainers to 5000 decliners. Small caps are giving back some of yesterday's large gains but are at day highs and are outperforming.
Under the surface, there continues to be very good trading in select small caps. I've been busying trading a number of 'junk' names this morning and see some very good technical action in names like Virgin Galactic Holdings (SPCE) and AgEagle Aerial Systems (UAVS) .
Whether this is a 'good' market or 'bad' market really depends on your focus. As an aggressive trader of speculative small caps, I'm finding this a very good market but if you are focused on the big picture and various macro concerns then there is good reason to be a little concerned especially as the price action is starting to slip.
My approach to this market is to stay focused on what is working and trade it aggressively. When the pressure on the indices starts to become more correlated and impacts individual stocks then I will adapt, but right now anticipating a market collapse is the most expensive thing you can do.
There are some pullbacks taking place in some of my favorite names and I'm starting to rebuild some positions that I've traded out of. A good example this morning is Forum Merger (FMCI) which is merging with Tattooed Chef. It has pulled back to its 50-day moving average where it looks to have found some support.
As you contemplate the action keep in mind what Peter Lynch once said: "Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves."