The Great Small Cap Lie

Earnings season is winding down. It’s great news for bears. Instead of having to deal with great companies reporting better than expected numbers every day, we can focus on the things that really matter: our pride and opinions.

If you haven’t noticed, our opinions range from the opposing political party is ruining the country, to the fed has engineered the greatest bubble of all time and they have to pop it now, to why have kids since life is hell and the earth is going to be a smoldering rock by the time they grow up anyways.

…Maybe we should just wait until next earnings season to get heavy long again.

The Nasdaq 100 is eating the world, but it’s not all roses out there.

The NYSE stock only advance decline line has lagged the NYSE Composite breakout. In fact, it never really confirmed the breakout.

Despite the indices holding up, a correction has been underway. You can see it particularly in breadth with the NYSE McClellan Oscillator. Interestingly, it’s already near what has been a floor. Take the hint.

What’s the cause of all this weakness? It’s the smaller companies.

The small cap breakout has been viewed as confirming the stock rally, but a deeper look at the small caps shows things are kind’ve a mess.

Small cap breadth still hasn’t made a new high with the indices.

New Lows in small caps are expanding.

Small caps remain in a relative downtrend vs the S&P 500.

So yeah, ‘price go up = bullish’, but there are some headwinds here. You have to throw good darts these days. It’s just not like a year ago when you could go to brunch, crush a few mimosas, type in any 4 letters, press buy and make money immediately.

All of the bad things media says are happening in the US are apparently actually happening in Latin America. It’s so bad that the best stock on the continent, MELI, is approaching the low end of its year long range.

Inflation is such a big non concern, that copper refuses to break down after a 150% increase off the pandemic low. Surely it’s no big deal. And even if it does go higher it’s fine, we’re not going to need a lot of it for anything important.

Pot ETF MSOS is holding the early November gap. So that’s one piece of technical evidence for bulls vs every other piece of evidence for bears. But hey, it always starts with 1

Trade ‘em well