Morning Gains Evaporate as Small Caps Turn Lower

It must be summer as trading volume continues to be light overall and price action continues to be sloppy. The NASDAQ composite coughed up morning gains, but volume failed to eclipse Monday’s trade. The Dow and S&P 500 were not as fortunate as volume was higher on the NYSE triggering a day of distribution for both indexes. The positive here is both indexes are above their respective 50-day moving average. Both still have significant overhead resistance while the Russell 2000 has cleared its resistance. We would prefer to see this market consolidate a bit here prior continuing higher. All we can do is control our risk through exits (stops) and our position sizes. We will keep grinding with this market and adjust as we proceed.

Yesterday’s losers were Energy and Industrials. Both groups were down more than 1.25% yesterday. XLE has been on a tremendous run as crude oil trades above $70 a barrel. The biggest winner of the day was financial stocks. XLF was set to have a banner day, but the afternoon trade clipped its gains. Regional banks helped the entire group up more than 1.22% on the day. Financials are an interest group especially as the market anticipates at least 2 more rate hikes this year. What these hikes will do to the economy is anyone’s best guess. Safe to say the Fed will likely go too far like it normal does and ends this tremendous economic expansion since 2009.

IWM has been on a tear as of late. The ETF was able to hang onto its 10-day moving average. We certainly would love to see the group consolidate. Build a platform to explode off of, but we probably will not get want we want. For now, the group has led this market for the better part of two months and likely will continue.

We hope you are having a great week. Our chat room is gearing up for SPY option trades this morning. Best of luck in your trading.