This report will be a short one, since not much has changed our outlook since last week’s alert.
We started the week with decent gains on Monday and Tuesday only to spend the next three days giving back all the gains and then some. We have a clear bifurcated market where the largest losses are again in the riskier smaller cap stocks and safer sectors like tobacco and utilities are doing well.
The Russell 2000 lost 1.2% for the week, while the Dow only lost 0.3%. Depending on where you are invested, you probably have a very different outlook, with the Russell 2000 and Nasdaq down over 7% from the high made in early march, while the Dow and S&P 500 are only down 2%.
Although the pain has been minimized in the larger stocks, this ‘split’ market isn’t a great sign for the longer term outlook. Each time the Nasdaq takes a hit like it did today (down 1.7% for the day), it chips away at the confidence of the bulls which over time can cause them to be more cautious keeping their money on the sidelines. Eventually with this lack of demand, will have a wide spread effect … OR hopefully enough time will go by that institutional investors will decide to start investing again which will allow the market to move up.
As I have said for a few weeks now, with the current uncertainty in the market and lack of demand, the best place to be is on the sidelines, protected. Until the Nasdaq and smaller-caps take part in the recovery, we quite possibly have more downside to experience.
Hope you have a wonderful and safe weekend.
Resnn Investments, LLC