Without Tariff Distraction Investors Focus on Bargain Shopping

Stocks advanced broadly for the second trading session in a row Monday, with the Russell 2000 IWM gaining 1.1% while the Magnificent Seven dropped 1.1% primarily due to weakness in Nvidia NVDA and Tesla TSLA. The only real weakness was a few well-known mega-cap names.

The day started slowly but picked up in the afternoon before a little late selling hit. The biggest positive was that there wasn’t any new tariff news to distract investors. They stayed focused on buying the many stocks that have fallen sharply over the past two weeks.

There continues to be talk about an economic slowdown, but there are also suggestions that recession fears may be a little overblown. With Jerome Powell scheduled to give the latest Fed policy view on Wednesday, there is the potential that he will provide some reassurance about the health of the economy.

The question now is whether this two-day bounce will turn into a V-shaped move. Is it clear sailing to the upside from here?

There have been periods in recent years where there were a series of V-shaped moves. These moves were typically driven by the Mag 7 and a few other mega-caps, however. This bounce is just the opposite, with the secondary stocks being the primary leaders. These stocks are not as likely to see sustained institutional inflows as the mega caps and are more prone to volatility and pullbacks.

The good news is that the lows hit last week are now key support. As long as they hold, the market has the potential to develop another uptrend, but if they are breached, it is likely to be very ugly very quickly.

What I want to see at this point are some downside tests that hold. If there are buyers on the pullbacks rather than panic sellers, that will be promising.

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

At the time of publication, Rev Shark had no positions in any securities mentioned.