Futures are set to open higher this week for the second straight week. We still have a pandemic to deal with but with the Federal Reserve and Federal Government willing to step in at a moment’s notice this market has brushed aside any downside risks associated with SARS-COV-2. The retail crowd remains very bearish over the next 6 months. Sitting here given the information we have with the potential of another quarantine it is no wonder the retail crowd would be bearish. What we must deal with are facts in the present and not with what may happen in the future. This stock market is a function of all its participants including the Federal Reserve. No matter what this market throws at us we will be prepared.
Friday’s market dealt with the Russell Reconstitution. One day a year the entire Russell Family of Index reconstitutes. Many indexes usually rebalance once a quarter, but the Russell Family of Indexes does it just once a year. The trade flow is massive the last hour of trading as Portfolio Managers adjust their portfolios to the new changes within all the Russell indexes. Volume is massive and soars within the last hour of trading. Put it this way, volume was larger on Friday than any time during the Pandemic market collapse. As we move forward, we will continue to focus in on winning stocks. There is no need to pay attention to those stocks not displaying proper price action.
Small cap stocks continue to lag the broader market. QQQ is the leading index and continues to push higher. IWM simply cannot get out of its own way. We have yet to see this group push higher and lead. In the past we would say this is an issue. For quite some time we have seen QQQ lead and continue to lead. While it would be great to see small cap stocks lead, we simply have not seen the group lead. We will say, IBB is pushing higher and will certainly help IWM. Stay tuned.
We hope you had a great weekend. Time to grind with this market. We wish you the best of luck.
