Today we look at large cap vs. small cap stock via the S&P 500/Russell 2000 Ratio. Since 1999, the ratio has gone nowhere other than down; which means this is the 8th year of decline. More generally, the ratio runs in 7 year cycles, so given we are in the 8th year, perhaps the time to consider readjusting ones portfolio is a wise decision. In fact, we believe the winds of change are forthcoming; it may not be today's business or next weeks, but we cannot ignore the developing bullish falling wedge. This, coupled with the oversold 20-week stochastic suggest a trend change; with confirmation coming with a breakout above both trendline and 100-week moving average resistance.

Therefore, the risk/reward dynamic of being long the ratio is rather good bet; certainly this should be on everyone's trading radar going forward.

Chip Anderson
About the author: is the founder and president of He founded the company after working as a Windows developer and corporate consultant at Microsoft from 1987 to 1997. Since 1999, Chip has guided the growth and development of into a trusted financial enterprise and highly-valued resource in the industry. In this blog, Chip shares his tips and tricks on how to maximize the tools and resources available at, and provides updates about new features or additions to the site. Learn More
Subscribe to ChartWatchers to be notified whenever a new post is added to this blog!
comments powered by Disqus