The Power Gauge Finds Opportunities in the Darkest Market Corners

Even with the recent bounce, the S&P 500 Index is still down roughly 5% this year. And the tech-heavy Nasdaq 100 Index is down about 6%.

But looking at the largest stocks only gives us a partial picture. After all, thousands of equities trade on U.S. exchanges every day.

And if you think the broad market has been bad… it’s even worse for smaller companies.

In the Power Gauge, we use the iShares Russell 2000 Fund (IWM) to measure small-cap stocks. And again, even with the recent market bounce, that index is still down about 11% this year.

It’s a crushing loss. And it shows just how fragile these kinds of stocks can be.

We’re also seeing big pain with midcap stocks. The SPDR S&P MidCap 400 Fund (MDY) is down roughly 8% so far this year.

And it makes sense when you think about it…

These companies are particularly sensitive to tariffs, economic uncertainty, and the kind of volatility that we’ve seen in the market lately.

They also suffer from not having the “safe haven” status that some of the larger companies do. Everyone knows that a consumer-products juggernaut like Procter & Gamble (PG) isn’t going out of business anytime soon.

But what about a midcap company you barely know the name of… one that’s dependent on imported steel, aluminum, or electronics from China? When things get rough, investors flee these companies.

But even in challenging times like these, the Power Gauge still spots opportunities in some of the overlooked areas…

Even Rough Markets Still Have Promising Individual Stocks

Many of these smaller stocks are ones that the Wall Street “big shots” wish they could load up on, but often can’t.

I’m talking about the stocks that drive America’s economy. And they have some of the biggest opportunities for growth that you can find.

Now, you might think that the Power Gauge would be warning investors to run away from this segment of the market. And it’s true that the two indexes I outlined above are looking particularly rough…

Right now in our system, IWM earns a “neutral” rating. And the vast majority of the stocks in this fund are either in “bearish” or “neutral” territory.

But there are still a lot of opportunities…

Specifically, 262 stocks in this fund earn a “bullish” or “very bullish” rating.

And we see something similar with MDY…

When it comes to midcaps, just 46 stocks in MDY earn a “bullish” or “very bullish” grade. That’s about 11% of the fund’s rated stocks.

Again, it shows that not all midcaps look bad right now. And as any investor knows, it doesn’t take 46 names to beat the broad market.

I know things have been bleak out there recently. But put simply, even in the darkest of markets, opportunities still exist. And here at Chaikin Analytics, we’re using the Power Gauge to help us identify them.

Does that mean every position in a volatile market is going to be a winner? Absolutely not…

But as investors, we can still use the tools available to us to push the odds in our favor. And when the market finds its next leg up – or even soars – we’ll be positioned to get the most out of it.

Good investing,

Vic Lederman