The good news on Tuesday morning is that breadth is running nicely positive, and small caps are exhibiting relative strength while the S&P 500 and Nasdaq 100/Invesco fund (QQQ) have losses. Breadth is about 4,350 gainers to 3,450 decliners, while QQQ fund has a loss of 0.35%.
The big complaint about the market recently is that it has been narrowly led by a small group of big-cap names. That gap will need to close at some point to produce a healthier market, so this is healthy action. The Russel 2000 exchange-traded fund (IWM) is up 0.9%, which is a good start, but there is still a tremendous inconsistency between the "Fab Five" big-cap names and the rest of the market.
In a normal environment, this sort of action would push me to put more money to work, but there are two problems. The first is that, while there is a good amount of green on the screens, there isn't much major strength. The buying is not aggressive, and it is hard to trust that momentum will be sustained.
The other issue that prevents much buying is that the debt ceiling issue is created a classic "sell the news" situation. The market has not seen any significant weakness on debt ceiling concerns despite plenty of talk about how disastrous it would be if there was a default. It is widely anticipated that a deal will be made before the deadline. Everyone is expected a positive reaction to an announcement, but it is a perfect situation in which to sell into the strength if there is more runup. If you aren't buying right now, then you probably will have another shot after the debt ceiling issue is resolved.
Ocular Therapeutix Inc. (OCUL) , a small biotech I've discussed previously, is breaking out of a good chart today. OCUL has a system for drug delivery to the eye that has a number of applications and is slowly being discovered.
One of my favorite names Beyond Air (XAIR) will post earnings in about three weeks and should have contract news. It found support last week at around $5.30 and is now seeing a little accumulation. I've been actively trading it while waiting for news flow to hit.
(Please note that due to factors including low market capitalization and/or insufficient public float, we consider some of the stocks mentioned to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.)
