Small-Caps Bounce While the Senior Indexes Struggle

The market correction continued on Tuesday, but this time, small-cap stocks held up better than the indexes. The Russell 2000  (IWM)  managed a small gain while all the senior indexes lost more than 1%. Because of the small-cap strength, breadth was positive on the day, but nearly 500 names hit new 12-month lows.

The Magnificent Seven  (MAGS)  lost 1.8%, setting up an interesting situation for Nvidia's  (NVDA)  earnings report, due after the close on Wednesday. Nvidia is barely holding support around $180. The big danger here is that holders will look to exit on the strength of a good report. We saw that dynamic with Palantir  (PLTR) , but Palantir was sitting at an all-time high when that occurred.

While the bounce in some of the hardest hit small-caps provides some relief, it shouldn't be viewed as a signal that the worst is over. There is still tremendous selling pressure, and the fact that it spread to the large-cap names and the DJIA isn't a sign of a bottom.

The good news is that there were signs of stock picking as traders tried to catch some falling knives and used good fundamentals as a justification for buying broken charts. Unfortunately, it is unlikely we will see many V-shaped recoveries at this point.

Stay cautious and protect capital. When the action improves, there will be plenty of time to put cash to work. Work on a shopping list while you wait.

Have a good evening. I'll see you Wednesday.

At the time of publication, Rev Shark had no positions in any securities mentioned.