Breadth Strong; Chips, Small-Caps a Concern

We are seeing some profit-taking into this very strong open, but we are still holding very strong. Breadth is much better today, but the small-caps are still lagging the big caps, which is troubling.

We also have a reversal in the semiconductors, which broke out yesterday, which is also a negative.

The chips need to consolidate recent gains and may be OK, but this is a key sector after that big move over the last few days. If they do not hold, that will tell us something about the ability of the market to work higher.

Even though the major indices have obvious momentum after going up 15 of the last 16 days, I remain quite concerned about the relative weakness in small stocks.

As I stated in my opening post, they could play catch up, but the greater likelihood is that buyers are playing the momentum game with an increasingly narrow segment of the market, and will eventually become weary of chasing increasingly expensive big-caps.

I've added to my Synalloy (SYNL) buy from yesterday that I mentioned following a very good earnings report, but am doing little other buying right now.

At the time of publication, De Porre was long SYNL, although holdings can change at any time.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider SYNL to be a small-cap stock. 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.

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James "Rev Shark" De Porre is the founder and CEO of Shark Asset Management, an SEC-registered investment advisory firm. He also operates sharkinvesting.com, an interactive online community that serves and educates active investors. De Porre holds business and law degrees from the University of Michigan, is a member of the Michigan Bar Association and a former tax attorney and CPA. He lives in Anna Maria Island, Fla., with his wife and two children.Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Rev Shark appreciates your feedback; click here to send him an email.