Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
While the S&P 500 is down only 0.6% for the quarter (a quarter all of 3 days old) – all of that coming today net net, the small caps have been very weak of late. Just since its highs this very past Monday, some 48 hrs ago, the Russell 2000 is down just under 3%. Which again speaks to the things happening under the surface not apparent in the Dow or S&P 500 as utilities, healthcare, and staples have hidden a lot of damage.
The Russell could in fact already be described as short term oversold – it is down to its 50 day moving average, and the bottom bollinger band. These need not cause a bounce but it’s generally an area bulls would try an attempt. See mid February and mid December for the last two times this BB was hit.
Overall I’d call this a land mine market. There are the obvious pockets of strength that everyone is mentioning but a lot of stocks are in just a few days imploding for 5 to 10%. Hence the term land mine – if you are in the wrong sectors, it really doesn’t matter that the major indexes are doing fine; you are down substantially in mere days. A lot of these are darlings of the first quarter – transports, refiners, and housing plays… among others.
So the million dollar question is, is this a “stealth correction” where the major indexes don’t take much of a hit while a lot of names under the surface correct? Or are the individual names foreshadowing a bigger move down in the indexes to come?
Of course EVERYONE is aware of the April/May selloffs of the past three years AFTER rallies to get Q1 off to a roaring start. So will it be that obvious to simply rinse, wash, and repeat?
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Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
