Rotational Action Accelerates but Stimulus Hopes Provide Support

The indexes managed to stay in positive territory all day, but selling picked up later and there was some stronger rotation out of the recent momentum favorites and back into the big-cap growth names.

Special purpose acquisition companies, electric vehicles, cannabis, bitcoin, oil, solar, and other recent leaders were choppy, while the FATMAAN tech names, semiconductors, and software experienced some positive rotation.

This constant rotation allows individual stocks to correct, while the indexes continue to trend higher. It requires more active trading, but it is good for stock pickers that stay focused on which sectors are performing best.

Much of the market could use a rest and a rotation is a good way to do it. It can be deceptive as it is easy to be caught in the wrong names when it takes place, but if you stay focused on managing trades, it won’t do too much damage.

With the first-of-the-month inflows and the holiday coming to an end, some of the positive sentiment will wane, but there are new reports of some sort of fiscal stimulus bill that will help to keep bids under the action. There appears to be bipartisan support for some additional stimulus in next week’s government funding bill and that will be all that is needed to keep some support out there, even if rotational action does pick up.

The trend is still positive, but the rotation is making it more difficult. Stick with stock picking and watch to see what sectors are acting best.

Have a good evening. I’ll see you tomorrow.

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