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By: Bill Spencer — April 12, 2020

Small-Cap Sunday - The Speed of These Moves Is Shocking

Hello my friend,

Thanks for stopping by.

If you celebrate either -- Happy Easter and Happy Passover.

I will be using the Zoom app to "meet" with my family this Easter. It should be fun. (Although I don't know how the others are gonna find all those colored eggs I've hidden around my home!)

The market just had it best week in decades, with small-cap stocks positively crushing it.

(By the way, I haven't forgotten that last week I said I was scouting out a way to play a major disruption in the mortgage market. I'm on it and and I'll have news in the coming weeks! So stay tuned...)

Here's what happened during the holiday-shortened week:

(Click any image to enlarge)

Double-digit gains in every major index.

Compare that to what we saw over the previous week...

And it's not just the magnitude of the moves that's so startling. It's the sheer speed with which this COVID-19 market landscape changes.

If you're a regular reader you know we have a special free website that does one thing. It tracks the important moves in our #1 indicator -- the New York Stock Exchange Bullish Percent Index (NYSE BPI).

The NYSE BPI shows the percentage of stocks on the NYSE that are currently on point-and-figure "Buy" signals on their respective price charts.

It's a big deal when a stock goes on a Buy signal because it means that the stock has penetrated a key historical resistance level where, typically, sellers have come in and pushed the price lower.

The break above resistance means that the bulls are muscling their way past the bears. The bears are stepping aside. The way is clear for prices to advance further.

At the depths of the recent market bottom (in late March) barely 8% of NYSE stocks were on Buy signals.

Then, on March 26th the BPI chart flipped to X's (a sign of short-term strength), where it remained for all of eight days.

I emphasize the number of days because, since we've been tracking this indicator on our free website (since January of 2016) the average amount of time the chart has spent in any particular column is 78 days.

Yet on April 2nd, after just eight days in X's, the chart reversed back into O's.

Eight day was by far the shortest stay in any common, ever. (The previous shortest stay was 16 days back in June of 2016.)

But then it spent just FIVE days in that O's column before reversing back to X's once again on April 8th, where it remains today. (The column at the far right on the chart.)

I'll repeat what I wrote in my commentary on the BPI page: "What we're seeing at this time is the very picture of market volatility."

When we look at the "breadth" of the market we see these moving just as quickly.

This is the image I showed last week (April 5th) of the US Industry Bell Curve (one of the many Premium tools we make available to members of our Sector Prophets Pro data service).

The data engines in Sector Prophets Pro generated that snapshot after the close on April 3rd.

Six days later, on April 9th, it generated this view of the market.

Like I said - "the very picture of market volatility".

At bottom, that volatility is the stepchild of uncertainty, which, as you know, the markets hate.

We face uncertainty on two fronts One, we don't know when the COVID-19 pandemic will  and begin to subside.

The experts (such as they are) have for a number of weeks been saying that April 12th -- today -- should mark the worst of it.

From here, we might see the tide turn. We'll see...

The second source of major uncertainty is the extent of the damage to the global economy.

We've never before thrown a switch and turned off 90% of economic activity.

Company's are withdrawing their financial guidance.

The Federal Reserve is printing money at a breakneck pace. (Witness Thursday's announcement by Chairman Powell of an additional $2.3 trillion in stimulus.)

So if you feel as though each trading day is a one roll of some gigantic "Wheel of Fortune", I'm right there with you.

It's a challenging time...

But remember, when it comes to the market ultimately that rusty old saw is true: This too shall pass.

Also true is that line from the hit song by Tom Petty: The wait is the hardest part.

But just you wait -- The market WILL settle in for another bull run higher.

That's what the market does.

And although it might not be something you or celebrate...

Happy Easter from me to you.

Have a great week,

Bill Spencer

Editor-in-Chief, True Market Insiders