Indices and Magnificent Seven Are Hiding Weakness in Smaller Stocks

Monday was one of those days when the indices masked some ugly action under the surface. Only 35% of stocks posted gains, but the Magnificent Seven gained 0.8%, which was sufficient to keep the S&P 500 positive.

The Russell 2000 lost 0.5% but finished well off its intraday lows, which is a positive, as it suggests some dip-buying interest. Pockets of momentum were limited, but the data center group showed some life with names like Cipher Mining (CIFR) , IREN Ltd. (IREN)  and TeraWulf (WULF)  performing well near their highs.

Biotechnology (IBB)  was the worst sector of the day due to problems at the FDA. The FDA surprised UniQure (QURE)  when it changed requirements that it previously agreed to, and an ugly lawsuit against a former FDA official caused additional problems. Investors don’t know what is going on there, and that has triggered some reduction in positions. There is too much uncertainty right now to attract new buyers.

Small-cap earnings start on Tuesday morning and will steadily flow through the rest of the week. There should be plenty of volatility to trade, and I’ll be looking for some new longer-term winners to emerge.

It was a tough day for stock pickers on Monday, but I view this as a healthy consolidation rather than signs of a significant market top. I’m keeping time frames sorted and focusing more on quicker trades.

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

At the time of publication, DePorre was long WULF and QURE.