I talked about an article on my program this morning from The Wall Street Journal that had some remarkable stats about the rotation taking place into the Russell 2000 recently:

"The Russell 2000 index of smaller stocks beat the S&P 500 over the seven days through Wednesday by the largest margin during a period of that length in data going back to 1986, according to Dow Jones Market Data. The Russell 1000 Value index, meanwhile, notched its biggest lead over its growth-stock counterpart since April 2001, after the dot-com bubble burst."

This week begins the tech earnings season with GOOG and TSLA, and then next week is the main event with AAPL, AMZN, MSFT, and META, among others. Earnings for the large tech stocks are what have driven this market higher, and we will find out in the next 2 weeks if that will continue to be the case, but in the same Journal article was an interesting points about the expectations for the Russell 2000 earnings:

"Together, the Magnificent Seven—Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla—reported a 52% increase in profits for the first quarter of this year, compared with a decline of 8.7% by the remaining 493 companies in the S&P 500, according to Ryan Grabinski, investment strategist at Strategas. Analysts expect the septet to report a 28% jump in earnings for the second quarter, while profits from the other S&P 500 stocks slip 1%.

Russell 2000 companies, meanwhile, are expected to report a nearly 18% rise in second-quarter profits, snapping a five-quarter streak of year-over-year declines, according to LSEG I/B/E/S data. Among the small-cap companies reporting this week are egg producer Cal-Maine Foods (CALM)  and printer maker Xerox (XRX)."

Disney is struggling today and has broken below the .618 line, on a day when markets are bouncing. We will see how DIS trades in the next week as the release of Deadpool & Wolverine hits theaters this coming weekend, but if this stock doesn't get a pop on that release, we may be exiting the position depending on how it trades. 

I've included many monthly charts in today's newsletter to provide some context of how small this pull back in the equity markets has been in the past week, as we still have green monthly bars in the ES and NQ. You can see how wildly different the Russell 2000 chart looks vs. the ES and NQ on a monthly basis.

We will be watching the earnings for the tech stocks closely, as if the earnings aren't there and they pull back indicating a weakening economy, this may be just the beginning of the pull back, as the other 493 S&P stocks are not going to save this market.

Long DIS at $102.25. The stop is $88.97. DIS is trading at $93.51.

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