Here Comes the Unknown...

Friday's afternoon volatility offers a hint of what's to come in February.

Dear Reader:

Friday’s selling wasn’t significant by any degree. I’ve been reading these newsletters by scrambling “experts” who signal that this was a bloodbath for the Dow Jones.

Here’s the chart on Finviz.

Now, this all comes down to perspective. A selloff of 337 points would have been significant… in the 1980s. I suppose I could stretch the chart vertically for 12 inches and make it look like a market crash.

But this was three-quarters of a percentage point.

Here’s the good: The S&P 500 finished January up 3%…

Here’s the bad: Selling pressure on the Russell 2000 was at VERY high levels.

The Russell 2000 had 85 companies with a market cap of over $1 billion, down 5% last week (and also down for January). These metrics are critical to understanding negative momentum, how capital leaves equities, sectors, and indices, and where it ultimately moves.

I’d venture to guess that about 50% of these companies are unprofitable.

As you know, the Russell 2000 reading for capital flows and momentum…