It was one of those deceptive days where the business media talk about the Nasdaq and the DJIA hitting new all-time highs while traders complain about the poor action in many stocks. While the major indices managed to post gains, breadth was negative with about 2,700 gainers to 4,000 decliners. Small-caps lagged again with the Russell 2000 ETF (IWM) down 0.5% and struggling to hold its 50-day simple moving average.
What saved the market today were the big-cap FANG names plus Apple (AAPL) , Boeing (BA) and a few others. Oil had another poor day and biotechnology struggled to hold up after more comments about drug pricing from the Trump administration.
There are two basic themes in the market now. The first is that there are no strong themes other than some outperformance by big-caps. There isn’t any sector that is showing unusual strength and even those that do well seldom follow through.
The other theme is the lack of momentum. The bulls couldn’t build on breakouts, but the bears can’t build on the lack of progress. We are stuck in a range with limited upside and no real downside volatility in months.
Big-cap strength is keeping the indices in an uptrend, but small-cap weakness is causing structural damage under the surface. Careful stock picking is essential. It is easy to take some sizable hits if you are in the wrong small-caps. This market is not bailing you out if you make mistakes.
Have a good evening. I’ll see you tomorrow.