I am trying to stay away from the market for a couple of days to try to catch up on some administrative matters while the trading action was poor. Well, of course we are now seeing some better action in the small-caps Thursday.
There were some poor responses to earnings, but dip buyers are active Thursday, and we have breadth running 5,300 gainers to 2,400 decliners.
One interesting characteristic of this market of late is that we tend to have fewer new 12-month highs on days when breadth is strong because it is mostly beaten-down small-caps and growth stocks that are doing well. When breadth is weak, it is normally extended big-caps that are leading, and they are making more new highs.
The small-cap earnings season is producing the usual volatility in many names. One theme that I'm seeing is that the surge in COVID variants is slowing down some of the recoveries, and supply constraints are hurting in certain cases.
One example is Arlo Technologies (ARLO) , which has been doing a very good job moving to cloud-based security systems, but it has supply issues as well as increased shipping costs that will hurt the company next quarter. Although Arlo had a nice beat and demand is greater than supply, they are forced to cut short-term guidance.
There are many other situations like this as smaller companies are still dealing with the COVID fallout, but the positive spin is that there is positive progress.
I like the better small-cap action today and am hoping for more stabilization in the group, but I expect things to stay choppy, which actually may be good from a trading standpoint.