Stock-Pickers Are in Control as Traders Look Beyond the Memes

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A late spike helped to push the indices into positive territory Friday, but overall it another good day for stock-pickers.

The Russell 2000 ETF (IWM) outperformed with a gain of over 1%, and breadth ended at around 3 to 2 positive. What was most notable were the pockets of strong action. Traders were aggressive in going after a variety of names and have not been limited to a small number of meme names.

There was some rotation action during the week, but it started off with a rush into small-caps that are being added to the Russell indices. This includes a number of former SPACs as well as quite a few biotechs. Meme stocks experienced more frenzied action this week as well, and there were concerted efforts to create short-squeezes.

The aggressive trading paused on Wednesday and Thursday but gained steam again on Friday. Buyers were even willing to chase into the close for a change.

This is a market that is being driven by themes and stock-picking much more than the indices right now. It would have been very easy for a correlated selloff on inflation worries to develop, but the market shrugged off the higher-than-expected CPI, and bonds rallied as well.

Overall the technical picture is good. We don’t have the frothy conditions we had back in February when stock-picking was hot, and most things are not wildly extended. Traders have broadened out their buying beyond meme stocks and are now even looking at broken sectors such as SPACs. There is plenty of room for more upside.

Have a great weekend. I’ll see you on Monday.