Small Caps Squeak out Gains; Dow Struggles

Volume was well off on Wednesday’s session as the Russell 2000 ended the session higher. We avoided distribution and that is a good sign for now. Any follow-through day followed by a distribution day ends the confirmed rally 99%% of the time. The positive here is we are still getting some long signals from this market. If we were finding a lack of setups it would be quite difficult to get bullish. We have our stops in place if this goes haywire. It would be nice to see this market start to look strong. Geopolitics certainly is having an impact on whether or not stocks can break free from this consolidation. We’ll await the market’s move rather than trying to anticipate a move. No need to be a hero here.

Well, Bears finally crept back higher. AAII Bears ended the week at 43%. The crowd is certainly bearish and with the headlines out of the geopolitical space it is no surprise. We don’t need any new wars. Bulls ended the week at 26% their weakest level since early March. Back at the end of August Bulls were only at 25%. It will be interesting to see how this market progresses forward with the crowd leaning towards the bear camp. Bears are at their highest level in over a year. We know what happened last time bears ticked this high. We kicked off a rally albeit a low volatility jaunt higher. Let’s see how this market moves forward. Stay nimble and keep an open mind.

The good thing here is we have small caps acting well. We do see the Dow as a sore spot along with the S&P 500. The sideways action has helped us avoid another v-shaped rally, but it would be nice to see the major market averages recapture their 50-day moving averages. Just stay nimble and keep an open mind. Do not let the noise of the financial media creep into your trading process. No need to make emotional decisions. Let others do that and provide us the opportunity to win!