Small caps led the decline on Monday with the Russell 2000 falling nearly .7%. The Dow shed 125 points along with the S&P 500 losing .4%. Volume was once again below its 50-day average, but higher on the NYSE and lower on the NASDAQ. Summer time trading typically is a light volume affair. The past few summers we have seen August be somewhat of a struggle and this one is turning to out to be much like the prior few. Utilities and Healthcare were the only two sectors in the S&P 500 to sneak away with gains. Energy, Materials, and Financials were down more than 1% each. Outside of the Russell 2000 we do need to see some sideways action in the S&P 500. Light volume consolidations days would not be unwelcomed here. This market is going to keep most guessing. We will stick with our process and ignore the noise.
Yesterday’s market saw the put/call ratio creep above 1.0 to 1.08(according to Bloomberg). Not an extreme by any stretch, but given the context of this market is quite surprising on what wasn’t that bad of selling the put/call would be above 1.0. In addition, the VIX at one point got back above the 15 level. Volume poured into the VIX ETFs like UVXY, TVIX, and VXX. These things move so fast if you are not quick with cutting losses and grabbing gains you run the risk of running your account into the ground. The VIX is something to keep an eye for the time being. We are still in a seasonally weak period in the calendar and it would not be out of the realm of possibilities of any kind of correction. We are not calling for one, but prepared for whatever this market wants to throw at us.
There are enough stocks out there to carry us higher, but it does not provide a guarantee we will move higher. We do have geopolitics still in play. However, even those aren’t having much of an effect as one might think. In the end, it may be what does this market in. For now, this market has been resilient in the face of what many would consider hefty headwinds. Whatever the outcome we must be prepared for what this market deals us. We cannot trade what we think this market should do. At the end of the day we are at the mercy of this market. No need to row up stream against a strong current. You will not last long in this game.
We hope you have a tremendous week of trading!
