«As Markets Battle>»
Coach Mark here.
Markets continue their violent rotation battle as selling pressure continues in tech while the “left behind markets” (a term we have been using to describe 2nd quarter non-participants in the bullish action) continue to receive a bid. Areas such as small-caps, biotech, The Dow, ARKK, and cyclical sectors have been susceptible to “sell everything” days when selling in technology has been strong enough to have the carry the volatility over to other areas of the market. Outside those moments (and there have been a few) the intraday pattern and price action has been very supportive of more successful than not attempt at rotation.
Markets are a little tricky right now as we are amid earnings season. We still have hundreds of companies to report in the coming weeks including four Mag 7 companies next week (META, AAPL, AMZN, MSFT) on top of inflationary data tomorrow, a Fed meeting next week, and the monthly unemployment report next Friday. We have seen some volatility cross over to other asset classes as evidenced by the strong break of support on silver overnight. There is no shortage of catalysts in the coming days to create strong price movement in either direction.
With that said, it is impressive to watch the price action in the left-behind areas the last week. Tech selling and market volatility might get the headlines but that is the real story of the market over the last couple of weeks.
Have a fantastic Thursday!
Chart of the Day: Small Caps (IWM)
Small-caps continue to show incredible relative strength to other areas of the market. Outside of severe selling pressure in all markets, the rotation trade has held up very well to this point.
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