Wait, WHAT? Small Caps Are … Hot??? Market On Open, Friday 12 July.
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Trick Or Treat?
by Alex King
CPI came in light. This is good. Nobody likes inflation running too hot. Jobs also came in good. This too is good. Nobody likes too many people unemployed. Now, since markets work on the basis of fundamentals, everything must have mooned yesterday, right?
D’oh! There go the bigs.
But wait. What is this now?
Apparently, it’s showtime for Mom & Pop Shops aka. the Russell 2000.
Now, it might be that for some reason I can’t think of right now, and a reason that hasn’t happened for, er, as long as I can remember, it might be that suddenly Big Money is going to want to put all that money to work with the smalls, and leave Failing Nvidia and Has-Been Microsoft behind. That definitely might be what is going on here.
But I don’t think so.
I think this is either a temporary rotation ahead of a more material seasonal sell-off (August and in particular September aren’t great months for equities, on average), or it’s a precursor wherein the Russell continues a move up (it’s been rangebound for more than two years now, vs. moonage in the S&P500 and the Nasdaq-100) to be followed by the Big Dogs once more.
In short, what I think is - either the Russell continues up and so the main indices, or, this Russell rotation is a fakeout and everything takes a breather into Q3, before a Q4 run up into year end. Or to put it another way, the market may go up, or down. That’s why our paying subscribers here give us the big bucks - it’s the devastating insight we offer!
Speaking of which, let’s toss opinion aside for a moment, since it’s worth about the same as the price paid to read it, ie. nothing, and let’s look at some facts, which is to say charts. Here we go!
So Let’s Get To Work
As always in our market notes, we deal with long- and short-term charts covering the main US equity indices - that’s the S&P500, Nasdaq-100, Dow Jones-30, and the Russell 2000 - plus bonds, volatility, oil, and key sector ETFs. You can use these daily notes to help you navigate long-term investments, and/or to help you action short-term trading. Any paid-tier subscription here gets you these notes every trading day.