25Feb11:23 amEST

Reminder: It's Still a New Regime

After a dramatic upside reversal and some follow-through higher today it is quite easy to assume the worst is behind us in terms of the Nasdaq and growth stock selloff. However, you will notice that even into this relief rally we have IGV XBI all lagging noticeably, with names like DKNG PENN actually red as I write this. True, they may be pausing after yesterday's fireworks before a new leg higher. 

But the larger point is that it is premature to declare a major bottom at hand. The distinction between "a" bottom for the near-term (days, maybe weeks) versus "the" bottom (months, quarters) is an important one to draw during bear markets, especially the early innings of the one I believe we are in right now.

Long-term inflationary troubles coupled with a procrastinating Fed are right at the forefront of our problems going forward, coupled with unwinding historically stretched valuations and retail euphoric sentiment. Just because it may seem logical that the bad news has already been "priced in," and that the growth stock carnage has been "overdone," does not mean that the market is done at all. In fact, that very mindset was spawn out of the epic bull market and likely needs to be washed away fully from the system before an actual, major bottom is at hand. 

Another bit of evidence of a new regime/new leadership. Even with gold and oil coming in today, alongside natty gas, note the XME and XLB materials' ETFs among the upside leaders, clearly ahead of IGV IBB. And with respect to dividend/value/safety plays, as MO (which is recovering today, byway) got crushed yesterday, a downtrodden value play like KHC has awoken the last few weeks, below on its daily chart. 

In other words, capital is rotating within the new leadership sectors, from sector leaders down to intrasector laggards, the hallmark of a strong sector. Now contrast that with growth. 

Going forward, the reversal this week may keep me off of new shorts for now. But I still view rallies as opportunities in growth and QQQ as spots to fade rather than load up for a major bottom, given the overall technicals, rotations, and macro headwinds. 

I Doubt This is the Last of ... Weekend Overview and Analysi...


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