They say that you shouldn’t kick someone when they’re down. But in the markets, that’s actually the best time to kick them, when they’re already down.
We call that “Relative Weakness”. When we’re shorting stocks, those are the ones we’re looking for.
In the case of Small-caps, they’ve been a heads up of a problem in the stock market since almost 3 months ago. They suggested stocks would struggle and would go sideways, at best.
And that’s exactly what we’ve seen. Many stocks and sectors going sideways, and a bunch of them going down.
BUT, if we’re going to go from Bad to Worse, then Small-caps are most likely the ones getting hit the hardest.
You can see in these breadth numbers that the internals in Small-caps have not been improving, they’ve actually been getting worse. [Read more…]