Info!! A Await At The Recent Underperformance Of Small-Scale Cap Stocks

The recent post noted weakness inward the break of stocks registering fresh 20-day highs vs. lows. Above nosotros tin run across a contributor to that weakness: the relative underperformance of Russell 2000 stocks (IWM) relative to S&P 500 large caps (SPY) since the momentum superlative inward September. Interestingly, pocket-size caps were outperforming large caps yesteryear nearly 6% on the twelvemonth inward September; since then, however, pocket-size caps convey genuinely moved to a slight underperformance on the year. This suggests a potential narrowing of the base of operations of the marketplace position rally, something I'll last watching for this coming week.
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Info!! Is The Marketplace Rally Broadening Or Narrowing?

One of the hallmarks of trading this twelvemonth has been the underperformance of small-scale caps relative to large caps.  As yous tin laissez passer on the axe encounter from the transcend chart, the Russell 2000 Index (IWM) has pretty good underperformed SPY for virtually the year.  Recently, however, that human relationship appears to guide maintain turned around.  At the recent marketplace position lows, nosotros did non encounter relative lows for IWM to SPY and, indeed, IWM is trading real nigh its highs for the year.  Similarly, microcaps (IWC) are trading at multi-month highs.  This is relevant, because it suggests that the recent marketplace position forcefulness has been broadening inwards its breadth, non narrowing similar recent rallies.

In the middle chart, yous tin laissez passer on the axe encounter that the cumulative NYSE TICK has bounced from recent lows, simply remains below its highs for the year.  When nosotros accept the cumulative TICK for all U.S. stocks, however--which captures the buying in addition to selling of the broadest market--we tin laissez passer on the axe encounter inwards the bottom nautical chart that that has moved to novel highs in addition to never corrected significantly during the recent weakness.  

I volition hold out watching breadth measures carefully here.  Given the expanding relative forcefulness from the smaller caps, this does non seem to hold out a weakening market--which suggests that the rally should guide maintain legs.

Further Reading:  More About the U.S. TICK
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