Here's My Best Advice for Trading the Market Right Now
Many appear oblivious to a key change taking place.
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After the drubbing on Wednesday, technology stocks managed an intraday bounce on Thursday but they closed weak and undercut the Wednesday lows. The Nasdaq 100 QQQ finished with a loss of 1.2%, and the S&P 500 gave back 0.5%. Both indexes have breached key support and are at risk of further downside.
The good news is that the rotational action into small-caps and the broader market continued. Despite the losses in the S&P 500 and Nadaq 100, breadth was quite good at around 5,800 gainers to 3,400 decliners. There were over 440 new 12-month highs, and the Russell 2000 gained 1.2%. It is forming a solid base near multi-year highs and looks bullish.
Market participants have focused for so long on the Magnificent Seven and the Nasdaq 100 stocks that many are blind to how positive the action is in other areas of the market. Biotechnology and energy were the leading groups today, and they held up well despite the weak close for the Nasdaq.
There is the PCE inflation report in the morning, which may have some market impact, but the main economic concern is quickly shifting from inflation to growth. Interest-rate cuts are coming soon, and that is what gives the rotational action some legs.
My best advice right now is to focus on stock picking in the groups with the best relative strength. For a long time, that was the Magnificent Seven and semiconductors, but it no longer is.
Have a good evening. I’ll see you Friday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
