The indexes have done a nice job of regaining their footing after a sharp drop in growth stocks last Wednesday. However, the action has turned choppy, and high-momentum big-cap stocks have slowed. Speculative action has narrowed to select SPACs and a few other random names. Groups such as cannabis and cryptocurrencies are being hit with profit-taking, and growth stocks are seeing more pressure again.
The good news is that this has been a rotational market with a fair amount of corrective action that is not reflected in the indexes. There has been good strength in small-caps and some speculative groups while growth stocks, FATMAAN names and various other sectors have digested big moves. It is healthy action but can be challenging to trade as the shifts between sectors can be very abrupt.
Bonds have fallen sharply, and interest rates have risen over the past week, which is the primary focus of the big-picture pundits. This has always been the primary negative narrative, but it isn't not creating the sort of broad pressure that the bears have been looking for. There is plenty of buying power under the surface, and it continues to shift around to where it is treated best.
For a while now, I have been urging a focus on stock picking rather than market timing. That is still working, but it is narrower as we lose some of the opportunities in cryptocurrencies, cannabis, and growth stocks. That means a more disciplined approach is needed, and stronger money management is required.
I'll be watching to see how much interest there is among dip buyers as groups such as cryptocurrency miners and MSO cannabis names pull back. I still like the aggressive trading in electric vehicle stocks, battery plays, and some select SPACs, but more patience will be required.
The good news is that some of the frothy speculation has cooled, and skepticism is building. We can use a little negativity to help set up the next market move.
We have a slightly positive start on the way as we await some economic data.
