Go big, or go home!

 

The stock market seems to be delivering a message to us right now regarding the kind of stocks we should be buying. That message is: Go big, or go home – in market capitalization, that is.

S&P

Above is the chart of the S&P 500. Its making new highs – a bullish omen for the markets going forward. Same goes with the NASDAQ. New highs all the way, baby! Things seem to be looking good. Or are they?

nasdaq

Looking at the bigger picture, we can see on the broad-based NYSE composite (which represents and index comprised of all stocks on the NYSE) that new highs are not being made. So what gives? Lets dig a little deeper.

nya

 

The S&P 400 mid-capped stock index (MDY is the ETF that follows this index, below) is flat. It sits roughly at its old high level in or around $260.

MDY

The Russell 2000 (IWM is the ETF for this index) isn’t even challenging its old highs. In fact, after hitting just under $120 twice (March & June of this year), it is struggling to test its last peak (a lower peak than the aforementioned two peaks) of around $117.

iwm

 

Clearly, the further down the market capitalization size we go, the less performance we are seeing. Perhaps until the small and mid-capped stock indices take out their old highs, we should focus on the clear leaders of current markets: the larger capped stocks.

Click here to see my BNN MarketCall appearance from last Friday. Lots of discussion about enery stocks. I enjoyed doing this one:

http://www.bnn.ca/Video/player.aspx?vid=480638

Below is the Globe & Mail article with my new “Top Picks”

Three top picks from ValueTrend’s Keith Richards

2 Comments

  • WHILE SOME MOMENTUM INDICATORS ON US EQUITY BENCHMARKS STARTS TO SHOW SIGNS OF ROLLING OVER IN THE SHORT TERM, MOMENTUM INDICATORS FOR TREASURY BOND FUNDS ARE STARTING TO CURL HIGHER (NOT YET!). WOULD YOU CONSIDER BUYING US TEN YEAR BONDS (IEF) ON TECHNICAL STRENGH, FOR A TRADE?

    THANKS AGAIN FOR YOUR INSIGHT ON ENERGY.

    Reply
    • That chart looks decent. I think if you are in it, I’d stay. The trend is in place until the last low of around 102.50 is taken out–so it looks decent for now. Seasonal patterns can slow down for bonds in the winter, but the trend is what really matters – so long as we get higher highs and lows, all is good for IEF

      Reply

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