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Small Caps Lead the Way as Volume Sells on Earnings


This uptrend has no quit as the market was able to hold off the late afternoon selling by finding support in the last hour and a half of the trading session.  By 2:30 it appeared the market wouldn't be able to handle the selling pressure and was about to roll over into new lows.  With distribution already flashing minor warning symbols today's apparent roll over may have been the final straw.  However, the market didn't change character as support rushed into the market pushing stocks well off their lows.  Small cap stocks continued their dominance and with the support rushing into the market this uptrend remains healthy.

Leading stocks appeared to take a break after posting nice gains on Tuesday.  Volume swelled mostly due to the Apple and Yahoo reacting to their earnings report.  So far, unlike in January the market has been able to hold up and avoid further price deterioration.  There just isn't any quit to this market not allowing stocks to set up properly, but if you are able to hold onto strong stocks you will be rewarded.

Small cap stocks continue to lead this market and while the Russell 2000 continues to go un-noticed we like to see this continue.  Often times when small cap stocks begin to lag it usually signals an end to an uptrend.  Since the March 2009 lows we have been in a long-term uptrend.  Like we've stated before, these can last on average of 18 months and can go as long as 3 years.  Corrections are a normal part of any long term uptrend and leading stocks will often give a clue by weakening prior to the downtrend picks up steam.  With small caps leading and with very few leading stocks breaking down it isn't hard to conceive the market will correct soon.  However, this may change, but we aren't going to "guess" when this will occur.  We'll allow the market to do the talking and we'll simply follow its lead.

Do not let opinions cloud your judgment as we've seen many folks try to pick a top in this market since the beginning of March.  The market is the ultimate price mechanism and we can never beat it.  No matter what anyone says, the market can not be beaten it can only be played.  If you cut your losses and stick with strong stocks you will be a successful market operator.

Stay disciplined and enjoy Thursday's market!

Disclosure: No Positions