A Surprising Small-cap Sector is Leading in 2018


2018 is off to a great start with the S&P 500 SPDR (SPY) up 5% in just 13 trading days. The rally is quite broad with six of the nine equal-weight sectors up 5% or more. I am showing the equal-weight sectors first because they reflect performance for the "average" stock in the sector. The PerfChart below shows year-to-date Rate-of-Change for these sectors. 

Technology (green) is the clear leader with a 7.71% gain and Healthcare (teal) is in second place with a 6.83% gain. Consumer Discretionary (red) and Energy (black) take third and fourth place, respectively. The Rate-of-Change for Finance (blue) and Industrials (magenta) rounds off to 5% for fifth and sixth place. 

The next chart shows year-to-date Rate-of-Change for the nine small-caps sectors. Even though the S&P SmallCap iShares (+4.23%) is up less than SPY (+5%) year-to-date, three small-cap sectors really stand out this year. First, small-cap healthcare (teal) is the leader with an 8.41% gain. Energy (black) is not far behind with a 7.92% gain and technology is in third with a 6.36% gain. 

The S&P SmallCap iShares finished the week strong with a 1.5% gain on Friday, which was three times the gain in SPY. Small-caps may get their mojo back in 2018. With healthcare, energy and technology showing leadership within the small-cap universe, these are the sectors to focus on for individual stock setups. 

Plan Your Trade and Trade Your Plan.

- Arthur Hill, CMT

Senior Technical Analyst,

Book: Define the Trend and Trade the Trend
Twitter: Follow @ArthurHill

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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