This Market Has Lost Small-Cap Leadership

The market has typically done a very good job of shrugging off trade war worries when they erupt. More often than not the early weakness is bought and the indices close well off the early lows. Recent the bounces have not been that strong but there has been positive intraday action.   Today the reaction was more negative than it had been previously. There was an early bounce but it faded and new intraday lows occurred in the afternoon. There was a little late buying, which was probably algorithm driven, but the closes were generally weak.   One of the problems with this market is that that it has lost small cap leadership. When the major indices were struggling in recent weeks, the underlying action still looked quite good due to the strength in small caps. That is no longer the case.   Breadth was about 2100 gainers to nearly 4800 losers and both new 12-month highs and lows were around 100. That is not internal action that offers much in the way of long-side setups.   Technically the action, while rather gloomy, didn't do anything to change the bigger picture. There is a gap on the S&P500 ($SPY) chart created by the gap-up open on Monday, that technicians will be eyeing if this pullback continues.   There aren't many positives in this market right now but there isn't any reason to be overtly negative. If this selling accelerates we will have to be even more defensive but I'm doubtful that will happen with earnings coming soon and the possibility that there could be some progress on trade issues.   Have a great evening. I'll see you tomorrow.
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