Bulls Step Up to Prevent Deeper Corrective Action

Following one of the worst days of the year for growth stocks on Tuesday, investors were anticipating further downside momentum on Wednesday. The action started poorly, but rotation into other areas was strong and the dip buyers jumped into the growth names about 90 minutes after the open.

The Magnificent Seven MAGS still lost more than 1% but the IBD 50 almost totally recovered intraday after a sharp drop. The DJIA managed to close flat. Breadth was close to even with a few more losers than advancers.

Although some red remained on the screens, the good news is that there was a strong appetite to buy the pullbacks. I wasn’t expecting my portfolio to be positive, and I’m a bit ambivalent that there weren’t deeper pullbacks to buy.

The action had some positive aspects to it, but we are not out of the woods yet. Part of the issue is the upcoming speech by Jerome Powell from Jackson Hole on Friday. It is very likely that Powell will once again reiterate that the Fed is data-dependent, but he is not likely to be overtly dovish.

The biggest problem that the market faces currently is that technical conditions are still stretched, and negative seasonality is likely putting some pressure on the action. There isn’t any major economic or tariff news at play right now, but there is a lot of talk about valuation levels and prospects for growth.

The market needs some resets, and it will probably take a little more time, but the good news is that some better charts will develop, and some new opportunities will emerge.

Have a good evening. I’ll see you tomorrow.

At the time of publication, DePorre had no positions in any securities mentioned.