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SMALL CAPS LAGGING LARGE-CAPS

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The Dow Diamonds (DIA) moved to a new all time high this past week and the S&P 500 ETF (SPY) recorded a multi-year high. En route to these highs, both exceeded their late February highs and large-caps are showing relative strength. In addition, both gapped higher on Monday and held these gaps throughout the week.

On the other side of the market, the Russell 2000 iShares (IWM) is having trouble with resistance from the late February high and small-caps are showing relative weakness. The ETF also pulled back rather sharply on Thursday and actually filled Monday's gap. IWM bounced back on Friday, but remains at resistance and has yet to breakout. The price relative (IWM:SPY) further confirms that IWM is not as strong as SPY. The indicator has been overlaid the IWM chart and it formed a lower high in April.



IWM is close to a breakout and a move above the February high would affirm the breakouts in SPY and DIA. Failure to breakout would show continued weakness and this would cast a shadow on the current rally. At the very least, relative weakness in IWM means we should favor large-caps over small-caps in the coming weeks and months.

Chip Anderson
About the author: is the founder and president of StockCharts.com. 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 StockCharts.com 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 StockCharts.com, and provides updates about new features or additions to the site. Learn More
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