Smaller caps...

While the market continues to lose momo’,  some of the smaller stuff on our shadowlist are definitely outperforming the bigger boys.    Perhaps, this is the reason we've been tilting our 'folio more toward the smaller stuff into year end. (dec 3rd Journal).   It is not a coincident, it's just the fact that smaller stuff have been making new highs while the mega caps are stalling along with the indices and some like AAPL/AMZN are rolling over.    Even with a good NFP report we had last Friday, it's not enough to propel this market to a close above 1115-1120 that we‘re looking for.    It is a bit frustrating if you are an impatient bull,  but we think the underlying market is still pretty good.

First of all, forget about financials!   Yup, as much as we hate to say, we are almost done with the notion of counting on financials to lead this market higher.  We can repeat these Dec 2nd words…“Only disappointment today is the GS/JPM ….  The more we think of it... this sector may lag for rest of year…”

Frankly, given the kind of run they had since March, it's understandable why they have stalled if the idea of hedgies on sidelines since late October is true.   They ran them up and now sit on gains and there is no one to move the bunch.   Other market leaders, such as AMZN  and AAPL , are also showing some sign of fatigue.   Perhaps, this is a message to us that we ought to be looking at the smaller stuff.    When we say smaller stuff, by no means we meant those ultra tiny sub $100 mill market cap thin movers.    Liquidity is still one of the most important factors when putting a play in action here.   Thankfully, most if not all of the smaller plays on our shadowlist have some very good liquidity.   If you've been paying attention, you'd notice that a lot of the action are coming from Chinese plays.    Everything from CAGC  to CTRP  to RINO  are getting some demand.   Today, we had ASIA, a play used to be featured here, announcing that they bought a rival giving the combined entity control of that segment of the business in China.   Stock popped 22% on the news and we've stuck it back up on our trading list today.

With the approach we've had with this market, we've been constantly shifting our weighting from the bigger stuff to smaller stuff and vice versa.   It's obvious that until the market gives us a reason to break out the recent high, our focus has shifted to the smaller stuff. 

Technically, nothing much happened and we are looking for a close over 20ma to stay firm and/ or SP ES futures at Friday’s lows of 1095.