Small Caps Join The Party - But Just In Time For A Rotation?

Person Holding White and Blue Box

Image Source: Pexels

In my latest video, I delve into some significant developments in the stock market (as a follow-up to "Bullish Truths Invite Small Cap Stocks to the Party – The Market Breadth"), prompted by a notable breakout in the IWM (iShares Russell 2000 ETF), which tracks small-cap stocks. This ETF surged by 1.8%, surpassing its last peak and turning positive for the year, signaling a potential trend towards new highs despite closing above the upper Bollinger band.

Transitioning from my bearish stance, I've moved to a neutral position, albeit with a clear caveat that I won't shift to being bullish. To navigate this change, I implemented a calendar call spread on IWM, targeting a price of 204. This strategy aims to capitalize on the short-term momentum, anticipating a brief slowdown before the market picks up again.

I also examined broader market trends, highlighting the bullish conditions across various indices. However, I pointed out potential bearish signals, such as shooting star candlesticks in the Wilshire 5000 and S&P 500 indices. These mixed indicators suggest a cautious approach, despite the prevailing bullish momentum.

One of my preferred technical indicators, the percentage of stocks trading above their 50-day moving averages (which I call AT50 for "above the 50DMA"), still shows a downtrend, reinforcing my cautious stance. Yet, the market's overall bullish breath suggests we might be heading towards overbought territory, prompting my shift to a neutral outlook.

Additionally, I shared insights on specific trades and stock performances, such as Children's Place (PLCE) and ARM Holdings (ARM), underscoring the importance of timely decision-making in trading. My successful trade with Intel (INTC), using a calendar call with a 46-strike price, serves as a practical example of strategic positioning in the current market.

Be careful out there!

Video Length: 00:10:13