It was de déjà vu for the market on Tuesday, at least as far as tech and small-cap stocks were concerned. In effect, there are only really 2 indexes you should set your sights on at this point: the NASDAQ and the Russell 2000 – not because they’re more important, more representative of the market, or any other factor. But rather, these indexes are important now because they’re where the action’s at – it’s the “green light” district, and it’s where the gains are coming from.
And truth be told, the gains are logical!
Think about the market risks. First-off, we have the Fed rate hikes which are around the corner, but what pans out to be an even larger risk now are the trade relations between the U.S. and other countries. This risk falls almost entirely on the shoulders of the large stocks, i.e. the large caps. So why go against the force of logic, and look for diamonds in the rough?! Why not go with the flow and look for stocks with 4 letters to their name and small caps?! Any day trading course would tell you just that!
That’s precisely what worked again yesterday, the NASDAQ and the Russell 2000 leading the way higher, while the S&P 500 and the Dow Jones saw listless sideways movement.
The NASDAQ ended up 0.41% with a new intraday high, in a replay of what happened on Monday. And in similar fashion, it was AMZN, AAPL, NFLX, and MSFT which propped up the index.
But with that said, you don’t have to be a heavyweight to create noise in this market. Long before the NASDAQ scaled to its current apex, the Russell 2000 had recorded a series of new historic highs.
Up, Up, Up…. that’s been the movement in the small stocks! Having consolidated at the beginning of May at the 50-period EMA, the Russell 2000 (IWM) was quick to go on the offensive. Yesterday’s surge to an-all time high was impressive, the daily gains coming to 0.62%; every attempted retreat was countered by an onslaught of buying pressure! Live trading couldn’t have been better. Since breaking up the 1,600 point level, the Russell has practically not taken a step back, not even to regain its breath. In effect, since May 4th, on only 5 occasions has the Russell closed the day beneath its opening price. The last time that happened was last Thursday, when it ended 14 points beneath the price at the opening bell – and that was its worst out of the abovementioned 5 sessions.
If we’re seeking technical targets for the Russell, we can be aided by Fibonacci levels spanning January’s high and February’s low. A Fibonacci extension of 61.8% would set the target far off at the 1,726 point level. Of course, we can expect the 1,700 point level to serve as significant resistance.
In Summary: The NASDAQ and the Russell 2000 continue to be the place to be – if you’re looking for opportunities that is! There’s no reason to look for opportunities elsewhere. It’s a lot easier to go with the flow and get in on the action when momentum is on your side. For the time being, the large indexes – the Dow Jones and the S&P 500 – have been left out of the party, concerns continuing to grow regarding matters of trade and in advance of the G7 Summit which will be held in Canada, and which kicks off this coming Friday.
Wednesday: Today’s trading will be affected by international trade figures and worker productivity, which will both be released at 8:30 N.Y. time. Investors will look for indications whether America’s deficit with China is growing. Live day trading will place a lot of emphasis on this. Lastly, as is the case every Wednesday, weekly crude inventory numbers will be released at 10:30.
Have a great trading day!
Today’s Picks – Day Trading!