This Is the Problem the Market Is Facing Without a Major Catalyst
Conditions are ripe for more narrow large-cap action.
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On Tuesday, the market suffered from the same sort of action as last Thursday when Nvidia NVDA reported its earnings. The semiconductor stock sucked up all of the buying energy while much of the rest of the market was sold.
The selling wasn’t quite as lopsided this time, but financials, small-caps, healthcare, industrials, retail, cannabis, and biotechnology were all weak, while the Magnificent Seven names exhibited relative strength with Apple AAPL, Amazon AMZN, Alphabet (GOOGL) and Nvidia NVDA performing well.
The problem that the market faces right now is that with Nvidia earnings behind us, there isn’t any major positive catalyst. When there isn’t any compelling news, then money tends to flow into the "safety" of the big-cap technology names.
PCE inflation data is due out on Friday, but there isn’t much else in terms of news flow right now. The Russell 2000 rebalancing will have an impact on small-caps over the next month, but there isn’t any major earnings news. There are a few retail earnings reports coming up, but nothing really significant like Nvidia.
The biggest issue right now is rotational action into semiconductors and a few Magnificent Seven names and out of everything else. Traders are still trying to find some meme action in GameStop GME and a few other names, and they also want action in very low-priced stocks like Faraday Future Intelligent Electric FFIE and Sharps Technology STSS, but it is fizzling out.
Conditions are ripe for more narrow big-cap action, but how much willingness will there be to chase them higher with important inflation news coming up at the end of the week?
Please note that due to factors including low market capitalization and/or insufficient public float, we consider several of the names mentioned to be small-cap stocks. 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.
At the time of publictaion, Rev Shark was long AMZN.
