Once again Small Caps stocks as measured by the Russell 2000 had a difficult time Friday lagging the broader stock market. After hitting an all-time high on Thursday SPY has stumbled a bit. QQQs have yet to reach its all-time high set back in April. This rally has been another v-shaped move as we have lifted of the lows quickly. We continue to see these types of moves from the market giving many whiplash. Our time-tested process helps ease the burden as we focus on sound risk management rather than guessing what the market might do next. Do not get caught up in the guessing game. It will not help you achieve your goals. As we progress into summer aside from the Russell Rebalance we expect volume to subside. As far as where the market goes its anyone’s guess.
IWM is a bit of a concern as it continues to be a lagging index. We’d prefer to see small cap stocks leading as it would indicate institutions and trader’s alike are willing to take on risk. Currently, IWM has formed a head and shoulders pattern with a down sloping neckline. This is a bearish pattern and given we have the rebalance coming up anything is possible. Keep an eye on IWM as we proceed. We will need to see institutions come in and accumulate small stock shares to avoid this group of stocks further weakness.
We are still in a market where headlines still dominate. A sound risk management strategy will always help alleviate the stress no matter how bad the market might be. We cannot miss out on any upside opportunity but cannot have a ton of open risk. It certainly is a balancing act we must perform in order to maximize our profit potential while minimizing our risk. Most traders simply cannot handle or simply ignore the most important bit of your trading process.
A quick note on Bitcoin as we see the crypto currency moving higher. Bitcoin pushed past 11,000 today, but as backed off. Quite the run since the beginning of the year. Will it get back to its former glory so quickly? Most doubt it and others swear by it. We will see, but one thing we know is the crypto currency is in an uptrend and has some decent gains since the start of the year. ETHUSD just broke out of a little pattern and LTCUSD is in an uptrend as well.
We hope you had a great weekend and wish you the best of luck this week!
