China Cuts Rates, will Market Run?

I quickly want to mention a new webinar series I will be doing with Joe Cusick (Trading Block), Drew Powers (MoneyBlock.com), Jeff Kilburg (KKM Financial), and Brian Stutland (Stutland Volatility Group). Monday through Wednesday at 12 PM CT, we will take 20 minutes to discuss everything from market action, financial planning and Volatility! Register now to reserve your spot!  http://www.tradespoon.com/webinars.php

Now, back to the markets… The market quickly ran out of the gates to the upside on Friday with the S&P 500 ($SPX) opening ~2113 and closing ~2116. The opening for the Bulls was just what they needed, but the large-cap index was not able to move much after the early surge, staying in a +3 point range.

The catalysts that I always look at first with any large-cap market rally are the small-caps ($IWM) and mid-caps ($MDY). Some of you readers have been e-mailing me asking why I look at the small caps? The reason is simple; they are the eyes into the heart of the US economy. If these stocks are getting weak, that is a good indication that all is not well in the US economy and any rally will be most likely short lived.

Friday’s lack of conviction in the small ($IWM) and mid-caps ($MDY) put the brakes on any further market buying in the broad market and in my portfolio.

You might ask then why did the market move so quickly to the upside? One could attribute the boost to the Consumer ($XLY). The Consumer Discretionary Sector ($XLY), and the Global Auto ETF ($CARZ) surged over 2 percent. The Home Construction iShares ($ITB) was up over 1 percent, and the Retail SPDR ($XRT) gained .84 percent. These are nice gains, but the issue I have is that the charge was lead by only a few stocks, not a broad base, which is not what you would like to see if a rally is to be sustained.

Stay on your toes this week and have a good trading Day!