Downside momentum has been rare in this market for the past year, but the bears managed to have put together two of the ugliest days in a row in a long time. The action in small caps has been particularly brutal, as bids simply disappeared, but the selling has spilled over to the rest of the market, although you wouldn't know it from looking at the Dow Jones industrial average.
Breadth was around 2,950 gainers to 4,850 decliners, which isn't horrendous, but the Russell 2000 fund (IWM) took a hit of 2% on top of a 3.6% loss Tuesday.
For many months, I celebrated the outstanding stock picking and speculative action in small caps, but now we have just the opposite. It currently doesn't matter what stocks you pick -- most of them are being hit. It is the nature of the market at times, and there isn't much we can do, but try to protect capital and wait for the process to play out.
Losses almost always occur much more abruptly than profits, and it can be quite discouraging to give back weeks or even months of profits in a matter of days, but that tends to be the way that it happens. It isn't anything new.
It is likely that this action is triggered in large part due to end-of-the-quarter pressures, but it doesn't much matter what the explanation is if you are losing money. The goal is to protect capital and be ready for the next crop of opportunities as they develop.
My shopping list is expanding, and I see some interesting bargains, but we need better price action before we can be aggressive.
Have a good evening. I'll see you tomorrow.
