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The Small Caps are Lagging – Is This a Problem?


by admin on July 16, 2019
in Charts/Essays/Reports









The rally off the 2009 bottom has been one of the biggest in history. From a time when many predicted the end of Wall Street as know it and the loss of an entire group of investors, the market bottomed.
Now, after 10 years, some analysts are calling for a top, citing the lagging small caps as evidence investors are rotating out of small caps and into large caps, with the expectation they’ll leave the large caps next.
But history says it’s normal for the small caps to lag as the market prepares to trade out of a large and extended consolidation period. And because of this, I’m in the camp that says we need to be selective with our investments and patient. Patient until the small caps catch a bid. Then, be ready to take full advantage of the next bull market.
Here are two prior periods where the small caps lagged.
During the 2011-2013 period, the S&P moved to a new high in Q1 2012, but the Russell failed to match the movement. Then the S&P hit another new high later that year while the Russell was only able to match a previous high. More time was needed. It wasn’t until early 2013 when the small caps finally moved to a new high that the spectacular 2013-2014 bull run, that saw the S&P rally 50%, started.


From Jason leavitt
 
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