My Market Approach Is to Stay Reactive Rather Than Predictive

 | May 17, 2018 | 2:07 PM EDT
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We have a market that is acting like it isn't sure what to do next. Will small caps continue to lead and drag the senior indices along or will the speculation mark a top that leads to the fourth failed bounce in the S&P 500 since the top in late January?

What is different this time is that it isn't the same sort of simplistic bullishness and momentum that drove the market for so long after the Presidential election. The leadership isn't just a small handful of names and it is difficult to even identify the hottest stocks among bigger caps. Apple (AAPL) has done a lot of heavy lifting but there aren't too many 'go to' names like Nvida (NVDA) was for a long time.

(Apple and Nvidia are part of Action Alerts PLUS, which Jim Cramer co-manages as a charitable trust.)

My approach to the market is to be reactive rather than predictive which means I'm staying with the bullish bias as best I can but I'm seeing more profit taking and finding less entry points so my cash levels are increasing. I do not expect that the Russell 2000 ETF (IWM) and S&P 500 are going to move in opposite directions for long and it is starting to look like maybe the (SPY) is going to drag down the IWM rather than the IWM pull up the SPY.

I am not making any new buys this afternoon primarily because I don't see any. If the S&P 500 closes low I am likely to look at adding index shorts.

Its been a good run for small caps and they are holding fairly well but I'm concerned that they are going to cool soon and that the S&P 500 may be a drag on stock picking again.

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