We have mild action Wednesday morning as market participants contemplate the potential for more rotational action. The rotational action tends to be computer-driven, so when it does hit, it quickly moves hundreds of stocks and causes plenty of collateral moves.
The most significant difficulty with this sort of rotational action is that it undermines stock-picking. Even the best picks will not perform well if they are in the wrong sector. Some traders focus on trading the sectors, but those moves tend to be very abrupt and produce counter-trend movements as sentiment jumps around.
In the early going, breadth is running around 4,200 gainers to 3,600 decliners, and there are 250 new 12-month highs to 120 new lows. Biotechnology, technology and high P/E growth names are lagging again, but the movement is not as aggressive as Tuesday when some big programs were driving the action.
The minutes of the last Fed meeting are coming up, which is likely to cause some movement in bonds again, which is driving the rotational action.
I am watching charts develop and will be a very aggressive buyer once it looks like the rotational action has calmed down. My thesis is that this action creates price dislocation in certain stocks that are being sold as part of the big baskets of out-of-favor names. They will present opportunities when stock-picking starts to develop again.
(Please note that due to factors including low market capitalization and/or insufficient public float, we consider TRT to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.)