There are indications that the recent spinning action is reversing

Much of the market has corrected since mid-February. Much of the business media missed this story, however, as it focuses almost exclusively on the major stock indexes. Now that the market as a whole is weakening and the corrective actions are more evident, they are starting to realize it, but the big story is that this is a gradual correction and different sectors of the market are reacting. very different way.

Many traders have been miserable for months because the speculative stocks they favor have done badly. Even cryptocurrencies eventually succumbed to the pressures and collapsed on Wednesday before rebounding quickly.
There was some panic in the market as a whole at the opening, but a steady rebound helped restore confidence throughout the day.

What many market watchers haven’t noticed is that the areas of the market that have been hit the hardest in recent months have shown some strength. It was minor and not easy to see in the indices, but there was better action in groups like biotech, gambling, growth, and other speculative areas.

The pessimistic view of the market is that it is not possible for these smaller secondary stocks to rebound if the senior indices correct. Maybe, but what we need to look for are areas of relative strength. Which stocks and sectors hold up better than the indices?

If the three and a half month rotation between growth and speculative names and value starts to reverse, then we should start to see better stock selection. Most growth and small cap stocks have been sold as a group without any consideration for individual merits. It doesn’t matter if they have good fundamentals or a story. If they were in the wrong groups, they were sold.

I don’t want to sound too optimistic, but there are signs that the rotation of the past few months is starting to reverse. Now is the time for the preferred value names to be corrected, and the question is whether that money will start coming back into other areas of the market that have been shelled.

The key here is to be patient and to stay alert. If this rotating action is reversed, then it will be a very unstable and inconsistent process. Sentiment will be affected by the major indices, but we should see some relative strength in stocks and sectors that see inflows.

It’s not an easy market, but if we can identify the rotating action that’s going on and make some smart stock selection, we’ll be ahead of the crowd.

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