It was a mixed session on Wednesday. The market that saw all the major indices finish well off the lows of the session. There were several storylines and narratives during the seesaw session.

Small cap stocks are moving into the spotlight. Don’t look now, but the Russell 2000 has been the hottest large equity index over the past five days of trading. The best proxy for the U.S. economy has gone up more than 4% in the past five days.

Index Performance	Russell 2000	Dow Jones	S&P 500	NASDAQ
Past 5 Session	+4.11%	-0.91%	+0.48%	+1.70%

Because there are so many biotech names in the index, it’s hard to glean a message other than it may be time to increase exposure to the U.S. economy. A couple of household names that really stand out are 1-800 Flowers (FLWS) and Angie’s List (ANGI).

On the other hand, technology remains a juggernaut that keeps powering the NASDAQ, which enjoys the strongest gains of the year. 

Index Performance	Russell 2000	Dow Jones	S&P 500	NASDAQ
Year to Date	+2.54%	+0.33%	+1.99%	+7.15%

Breadth of the index is very impressive:

• 1821 advancers versus 1,083 decliners
• 163 new highs against 26 new lows
• 1.3 billion up volume versus only 771 million down volume

It was also impressive that leadership wasn’t the same old names, although Facebook (FB) rallied higher. Yesterday’s session was all about software companies including, Autodesk Inc (ADSK), Red Hat Company (RHT), and Adobe Systems (ADBE). 

The semiconductors act great as well as Micron Technology (MU) and Advanced Micro Devices (AMD) are on the cusp of major short squeezes.

After the close, Thor Industries (THOR) mdae a big move on earnings. This is a stock I love, and I think the shares should be above $200, but nagging issues over inventory management have helped the shorts hold down the share price.

Wynn (WYNN) casino shares are also much higher, even after new company CEO Matt Maddox spoke to the investment community yesterday for the first time.  This is another oversold name that could take off if new management gets its focus back on business fundamentals.

Overall, I like the way the market is handling all the obstacles it’s faced this year, and there has been a myriad of reasons to panic. The next break out will be well-earned and worth chasing.

Trade Surrender

I want to revisit the tariff debate one more time because yesterday, we saw where our international trade deficit climb from 5.0% to $56.6 billion in January, which was more than anticipated, and the highest level since November 2008. 

Imports were unchanged at $257.5 billion, while exports declined 1.3% to $200.9 billion. While the elitists say this is actually good news, it has a very negative impact on the Gross Domestic Product (GDP), which explains why the Atlanta Fed lowered its first-quarter estimate to 2.8% from 3.0%.

Deficits soared with our largest trading partners:

• Imports to China were the same, but our exports declined, lifting the deficit +16.7% to $36.0 billion
• The deficit with Canada increased 65% to a three-year high of $3.6 billion

Today, we are supposed to get the actual announcement from the White House. I suspect there will be carve-outs for Canada and Mexico, but make no mistake, they have to play by the rules, too.

Today’s Session

I interviewed Peter Navarro last night, and the man of the hour says there will be a carve out mechanism for Canada and Mexico announced this afternoon to give them 15 to 30 days to make adjustments to our NAFTA agreement to qualify for an exemption from the administration’s steel and aluminum tariffs.

I suspect the Wall Street worry machine shifts from tariffs to wages as we wait for tomorrow’s jobs report.  I’m rooting for strong results, and I think it’s the basis for the long-term value proposition of investing in the stock market.

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