It May Be Time to Play Small Ball
This column was originally published on RealMoney on March 27 at 12:00 p.m. EST. It's being republished as a bonus for TheStreet.com readers.
Let's focus on the incremental positives in a market that's been perfect for daytraders but a real pain for everyone else. I know how tough it is to keep your sanity when every rally gets faded and every selloff attracts support. Hopefully this March madness will come to an end soon.
We've been stuck in a long stretch of high noise and low signal. The greatest risk during these choppy periods is to overtrade, because every uptick looks like a bull market and every downtick starts a panic. In reality, not much has happened in the financial markets this month, but things could change quickly in April.
Note the terrible reward/risk profile in the small-caps so far this year. Since the start of February, the iShares Russell 2000 Index Fund (IWM) has risen less than 2 points, although it shows two major selloffs in the same period.
In turn, this rally might send OBV to a new high for the year and generate yet another bullish divergence. These dynamics would follow the melt-up scenario for a spring rally I discussed
|Source: eSignal Power Scan|
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