Thursday May 26, 2011- Small Cap stocks as represented by the IWM, Ishares Russell 2000 led the market higher today in sharp price action. The broader markets had a large divergence in performance, the Dow and S&P 500 both slightly higher on the day, and fading at the close. The Russell 2000 and the NASDAQ were up 1.3% and almost .8% and closed right near the high of the day. Volume was lighter than normal on the NYSE and slightly above average on the NASDAQ.
Although we would like to think the Russell 2000 and the Nasdaq are trying to become new leaders of the next leg up in the market, no indices have been able to clear significant technical hurtles to warrant more long exposure. We would like to see a close and hold above the 10, 20 and 50 day moving averages along with price moving above the recent highs in early May. The IWM is the closest to accomplishing this and we are watching this formation closely.
We admit our timing was off in our recent move to raise cash and hedge the portfolio, but the Momentrix Model portfolio continued to outperform the market slightly over the last 2 days. We have noticed some sentiment indicators become more bearish recently making us question our defensive position, as we don’t like being with the crowd. Should the technical picture improve we will be quick to readjust the portfolio.