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Small Caps Lead Market Stabilization


The market regained its equilibrium yesterday.  But there was enough doubt to keep all the major indices in the red, as a last-minute rally fizzled out right before the closing bell.  The NASDAQ erased the largest decline, as some buyers went from tire-kickers to nibbling on weakness.  The Russell regained its winning ways, rallying 1.72% on the session. 

Market breadth was better, but losers continue to suffer.  Selling begets selling, resulting in more stocks hitting 52-week lows than highs on the NASDAQ.

Market Breadth

NYSE

NASDAQ

Advancing

2,067

2,467

Declining

1,235

1,670

52 Week High

119

73

52 Week Low

37

95

Up Volume

2.69B

3.13B

Down Volume

1.32B

1.53B

 

Small Caps Lead the Way

The Russell 2000 continues to outperform its larger broad equity index brethren. It appears ready to move higher and maybe retest the recent high.

The index is trading below its 20-day moving average but holding well above its 200-day moving average, which suggests near term oversold conditions, but long-term upward bias is firmly intact.

Portfolio Approach

We continue to have only one cash position open and a long list of potential buys.

Today’s Session

The official unveiling of President Biden’s Infrastructure plan will happen today, of which less than a third is earmarked to go towards fixing bridges and roads.

Jobs will also come into focus as well.  We got the ADP Employment report today. There were 517,000 jobs created against consensus of 550,000.

  • 437,000 Service (169,000 leisure)
  • 80,000 Goods (32,000 construction 49,000 manufacturing)

ADP Report

There is a lot of excitement that the Friday jobs number could peak above one million for March. 

Interestingly, I’m not sure the street wants a great jobs report because of all the chatter about inflation.  I think a great jobs report speaks to better underlying fundamentals for a rally that would rely more on organic growth than money printing. Although, I admit, the street cannot be let off the Fed money printing hook for a couple of years.

Meanwhile, data from Indeed shows new job posting growth beginning to slow.

To see the chart, click here.

The market is stabilizing and wants to go higher.  Bond yields are an issue and leadership the other.

There have been a lot of head fakes.  Let’s see how things go.



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