Did the market just bottom?

Stocks have been under pressure as of late.

The S&P 500 (SPY) has fallen 5% from its recent highs. The tech-rich Invesco QQQ Trust (QQQ) has dropped 8%.

This is a change of pace. For the past several weeks, we’ve been in an easy-money environment.

But bulls have answered the call. 

SPY finished yesterday down just 0.3%, or about 2.2% off its daily lows. The QQQs also bounced hard, finishing the day down 1.2% after being down 5.4% at one point from its highs.  

This is encouraging, but the market still has a lot of work to do. However, I like what I see beyond the major indices. 

Yesterday, the S&P 500 Equal Weight ETF (RSP) finished green. It also finished above its 10-day moving average after flushing below and finding buyers at its rising 21-day moving average. 

To be fair, RSP gives equal weight to defensive stocks as it does to “risk on” names. And right now, several defensive groups are performing well. 

Healthcare has been the strongest-performing sector over the past week, climbing nearly 5%. Real estate and consumer defensive stocks are the second and third best-performing groups.

But they aren’t the only groups that have been on the rise. Financials and industrials have also been catching a bid. We’ve even seen strong recent outperformance from regional banks. Take a look:

At the same time, small caps are holding up well. 

The iShares Russell 2000 Index Fund (IWM) also closed green yesterday.

This is a very encouraging sign.

It tells us participation is broadening, and the recent pain we’ve seen in the markets is most likely a temporary unwind in high-flying tech stocks. 

As a stock picker, I see this concentrated selling as a good thing. It opens up more opportunities to buy other areas of the market that are setting up for big moves.

Finding those setups is what I help readers of my Express Trader advisory do every week. It’s designed for busy people who don’t have time to watch the market all day, every day.

In Express Trader, I send readers my top three trades that they can act on every Tuesday, including my ongoing market analysis for the week ahead.

Upgrade to Express Trader here.

Justin Spittler

Director of Trading, RiskHedge