Don't Ignore This Chart!

Don't Look Now, but Small-cap SCTRs are Leading


May was a strong month for big tech stocks, small caps and mid caps. It was such a big month that the Russell 2000 iShares, S&P SmallCap iShares and S&P MidCap SPDR are in the top third of the SCTR table below. Notice that the Russell 2000 Growth iShares is the strongest of all with an SCTR above 90. Large-caps are in the bottom third with SCTRs below 70. Notice that the S&P 500 SPDR and the S&P 100 ETF have SCTRs near 69. This is still ok because the SCTRs range from zero to one hundred. A SCTR of 69 means the ETF is in the top 31% of all ETFs in our universe, which excludes leveraged and inverse ETFs. 

Click this image for a live SCTR table. 

Relative strength from small-caps and small-cap growth stocks is positive for the market overall. Small-caps have higher betas than large-caps and growth stocks have higher betas than value stocks. Relative strength in small-cap growth stocks reflects a good appetite for risk in the stock market. The second image shows a PerfChart with the performance for eight major index ETFs since April 30th. Notice that IWM is up 2.76% and leading the pack. QQQ is in second place (+2.27%) and handily outperforming SPY, which is up 1.33%. 

Click this image for a live chart

You can read more about our StockCharts Technical Rank (SCTR) in this ChartSchool article. 

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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