Wednesday’s market action was certainly a positive for the market as the NASDAQ led all indexes higher. Once again, volume lagged and so did IWM. QQQ and SPY had great days apart from volume. Volume was lower across the board despite the solid price gains. We would have preferred to see selling dry up in light volume versus a day of gains without volume. Headlines overnight from the Chinese national news hit pushing futures higher. It appears trade talks will resume in October with a meeting. Whether this produces a rally or not will be seen. Price and volume will need to confirm if this rally is to stay alive. This market still sits on shaky ground and only solid price action with volume behind will harden the deck. We will continue to enforce our trading rules and risk management process. Let’s see what this market has in store for us.
It is still a bit odd small cap stocks are not seeing any love from this market. Historically, the group is seen as a risk play. Unlike XLU and XLRE IWM is seen as “too risky” to invest in. Perhaps this will change with the times, but it has been quite some time since we have seen small caps enjoy leadership in this market. A shame, but reality for us and we must continue to stick with strength.
Sentiment was little changed week-over-week in the AAII survey. Those who were bullish rose 2.5 points to 28.6%. Bears fell 2.7 points to 39.5%. While neutral respondents inched higher by .2 points to 31.9%. Certainly, we still see quite a few bears in the survey, and it isn’t surprising given what we have been witnessed to over the last few weeks. We know August, September, and October are historically tough months too. This isn’t surprising to us one bit nor should you be surprised.
Interesting to see a few solar stocks come across the desk. SEDG and JKS are two names that have been past winners in the solar space. MDB remains an interesting play too. You must always be on the look out for stocks with outperformance. Big winners always show strong relative performance prior to big runs. While we are in a different market than we were more than a decade ago this still holds true. If we stick with winners with our risk management process, we will catch majority of these big moves.
This holiday shortened week will certainly get a bit more interesting given the headlines out of China. Now, we need to see volume support this price movement.
