Karpel’s Corner: As Small Caps Go, So Goes the Market

Welcome to Karpel’s Corner. This is where I throw out my thoughts on the markets and share some of my favorite strategies. I keep it market-focused, and never miss an opportunity to teach trading strategies and commentate on the latest trends affecting the financial markets. Hope you enjoy today’s post!

Weeks ago, I pointed out the weakness in the domestically based Small Caps ($IWM) was a red flag for the Large Caps ($SPX). That has held true to date.

If you are a bear, then the May lows on the $IWM, which reached $107.44, are a signal that spells danger for the overall market. The probability exists that the Small Caps ($IWM) could touch $107.44, ~56 percent, going into September. It’s getting warm enough to cool a few bulls.

The Large Cap Indices are testing support at this stage. One other flag that I have discussed is the High Yield Bond markets ($HYG). They have have been in a tail spin for the last 3 weeks. If they cannot turn back to the upside with conviction, the bulls are going to see some further pressure. For right now, I’m just enjoying the two sided trade.

See you next time at the Corner!