Investors Shift From the DJIA and S&P 500 to the Nasdaq and Russell?

NEW YORK (TheStreet) -- The stock market finished the week where it begin. The DJIA and the S&P 500 continued to lead the way higher, although up just fractionally on the week. The DJIA closed up 0.004% for the week at 16583.34 and the S&P 500 index closed up 0.001% at 1878.48. All in all, a flat week for those indexes.

The real show this week was put in by the Nasdaq and the Russell 2000. The Nasdaq closed the trading week down 1.23% at 4071.87 and the Russell 2000 closed down 2% on the week at 1107.22.

Thus, we continue to have that two-tiered market I've written about for the past three months. How long can this trend continue?

This stock market continues to warn traders and investors to be extremely cautious. Trading this stock market in 2014 has become a very challenging. There is absolutely no common theme that traders or investors can be comfortable with.

The whipsaw trading action from day to day is causing many traders and investors to stay on the sidelines. The trading volume on a daily basis is confirming that fact. The S&P 500 Trust Series ETF (SPY) on Friday closed with volume of 82.4 million shares.

Friday saw the Nasdaq and the Russell 2000 indexes in the red. That gave boththose indexes an oversold signal according to my algorithm process, and followed with an intraday turn to the upside.

The DJIA and the S&P 500 saw no such oversold signal. We may indeed begin to see a rotation from the larger cap stocks into the small cap stocks next week.

However, make no mistake about it, the Nasdaq and Russell 2000 indexes are in Trend Bearish territory. So, do not expect any major up move going forward. Any up days in these indexes should be used as selling opportunities within a bearish trend.

The momentum stocks such as Facebook (FB), Netflix (NFLX), Priceline (PCLN) and Amazon (AMZN) will have a couple of days to the upside before the downtrend continues. Be careful and know the Trend that we are in. This is no time to be a hero. Heed the signal and trade accordingly.

Focus on those stocks that are in Trend Bullish formation such as the Select Sector Utilities ETF (XLU).

On Friday, I covered my Cameco Corp. (CCJ) short that I mentioned Thursday. Another win for better than 1%. I also started a short position in Bob Evans Farms (BOBE). This is a stock that is approaching an extreme overbought signal according to my internal algorithm process. That process is available at www.strategicstocktrades.com if interested. A 93.60% success rate since inception.

At the time of publication the author was short BOBE.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Richard Gobel, owner and operator of Strategic Stock Trades, has more than 30 years of experience in the investment business.

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