The Markets Are Asleep, but There's Plenty of Profit to Be Had Here

This probably sounds familiar: The year is 2018, and stocks sold off sharply before they rebounded - and then they sold off again...

We've seen and heard this all year.

Meanwhile, the S&P 500 Index's 50-day moving average continues to drift lower (despite working as support for Tuesday's market meltdown).

Sometimes no news is good news, and sometimes no news really is no news.

If you thought there just wasn't much going on, you'd be... mostly right. But only mostly, because of the one big, bright shining star I'm looking at now.

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I'm Crazy About Small Caps Right Now - Every Investor Needs to Be Here

The one vital sign in the crowd of flatliners is, of course, the Russell 2000 index: small caps. They're continuing to outperform the broader markets.

The index even hit an all-time high on Wednesday.

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Since its April 2 low, the Russell 2000 has gained 11%, compared to 9% for the Nasdaq and just 6.5% for the S&P 500.

I've talked before about this small-cap outperformance being a bullish indicator, as it reflects a "risk-on" mentality among traders. The upward and downward volatility that characterizes the sector is an absolute must for making money.

That's largely why I've kept a clear bullish bias in my Seismic Profits Alert portfolio and will continue to do so while the small caps lead the market.

I do, however, find it interesting that Treasury yields have fallen off a cliff since peaking above 3.1% two weeks ago. Rates plunged below 2.8% on Tuesday and haven't risen too dramatically since.

But despite that, the market has shrugged off this seemingly good news as stock prices have gone nowhere over the past three weeks.

I mentioned this last Thursday, but it bears repeating: Like a bored teenager, this market doesn't seem too fazed - or enthusiastic - about anything.

Admittedly, there's a lot it should be worried about.

Trade-concern "headwinds" could very well become "hurricane-like blasts to the face," if the imposition of steel and aluminum tariffs on allies like Canada, Mexico, and the European Union escalate conflict. The North Korean summit is anyone's guess. The Italian crisis is a new-old player, but concerns have calmed on our side of the pond. Gas prices are rising. Yields are falling.

This action is supposed to get a rise out of stocks.

Or maybe the market is just numb to the ever-swirling news at this point. But whatever the reason, the boring tape action continues.

Normally, here's where I'd show you a chart of the S&P 500... but it might just put you to sleep. You get the idea.

Last week, I also said that this is a stock-picker's market. So, despite the boring price action, it's smart to let those "short squeezes" I wrote about earlier this week point the way to big profits. That's excitement enough for me.

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About the Author

Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.

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