Small Cap stocks lead the way as the Federal Reserve fuels the market rally
Hitting 2 year highs stocks add to gains after the Federal Reserve announced its second round of quantatitive easing. Commodities benefited from more dollars flowing into the market. Technology stocks did lag the overall market as the NASDAQ was the lagging index on the day, but small cap stocks faired best. Closing with gains of 2.56%; the Russell 2000 leading the entire market a positive signal for the entire market. Volume soared as traders rushed into stocks and commodities with NYSE volume higher by 18% and the NASDAQ by 24%. This uptrend remains on solid ground with plenty of upside left.
On September 27th I wrote a piece about how opinions will cost you dearly in the market. Whatever your opinion this market remains in an uptrend despite what you think this market should be doing. Again, the market is priced in dollars not gold and our Federal Reserve continues to print money. It is a simply correlation as money supply expands the excess will flow into stocks and commodities. We’ll go through minor corrections like we did over the summer and at some point we’ll find ourselves in a bigger decline. However, for now, we remain in an uptrend and stocks are to be owned.
Bulls continue to dominate the AAII investor sentiment survey with Bulls at 48% while bears stood at 30%. Bears did jump over last week’s figure, but certainly the crowd believes this market’s uptrend will continue. As we have cleared April highs sentiment will become more relevant, but it is secondary to the action of leading stocks and the market. Until we see our primary indicator: leading stocks and the market weaken sentiment will not matter. It will matter, but so far it has been dead wrong. Pay attention to the leaders and the market and NOT your opinions.
The market may be OVERBOUGHT, but we know these conditions can last for a very LONG time. Selling because we have gone up too much is simply a foolish strategy, sure take some profits, but going up “too much” is not a sound investment plan. Stick with the leading stocks and Big Wave Trading and you will be performing at your potential!
The trend is our friend right now and it FLASHING higher prices for equity prices. Fighting the trend has been and always will be a futile effort and will only lead to you seeing greater losses in your accounts. Always cut your losses short.
