Small Caps Shine As the NASDAQ Clears a New High

Following through on the gains from Friday were Small Cap stocks as well as the NASDAQ Composite index.  The market continues to be in an uptrend and we continue to find stocks moving quite nicely in this uptrend.

Monday’s gap up was a welcoming sign as the NASDAQ Composite vaulted into new high territory.  Volume was lower as expected from Friday’s elevated session (thanks to Quadruple Witching).  It was important the NASDAQ hold this gap move along with hanging onto the midpoint of the day.  Since August we have seen the NASDAQ get sold as the index moves into new high ground.  For now, we did not see such action and we will avoid anticipating a reversal.  The NASDAQ remains in a strong uptrend and we are looking for the index to continue its march higher.

Small caps enjoyed another nice day closing just off the highs of the day.  We are pleased to see the small cap indexes add-on onto Friday’s gains as a sign of strength.  Small caps tend to lead at the beginning of a rally and the end.  Although we might be approaching the end we certainly will not take the chance on missing out on gains.  If small caps are setting up and running we are going to take advantage of their moves.  Whatever our opinion on the market will simply NOT matter as the market does not care what we think.  Going with the flow and not fighting a trend will only give you the opportunity to grow your account.

Breadth measures certainly supported this market as gainers beat advancers by a two to one margin.  If we saw fewer stocks move higher with this move it would certainly call this uptrend into question.  It is important to have many stocks moving in the same direction to confirm price and volume.  We value price and volume action the highest.  You could simply avoid all other factors and still come out on top, but we do know the importance of breadth measures.

Try to keep things very simple and not over-complicate.  Read and review charts while not forgetting fundamentals.  Too often we see charts are ignored and the focus is solely on Fundamentals.  The flip side is also true, simply ignoring fundamentals is a danger as well.  However, using history to bring both fundamentals and technicals together is a proven formula to making money in the market.  Whether its 70/30 fundamentals and technicals or the other way around ignoring one over the other has proven not to be successful.  We are in the market to maximize our profit potential and the way to do is with both studies.

As the weeks wears on we’ll be watching if stocks can muster the strength needed to continue this uptrend.  Always keep your losses short!