Don't Ignore This Chart!

Small-caps Continue to Outperform Large-caps

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The S&P Small-Cap 600 has been leading the S&P 500 since mid February as a key ratio chart hit a multi-month high last week. The main window in the chart below shows the $SML:$OEX ratio, which plots the performance of the S&P Small-Cap 600 relative to the S&P LargeCap 100. This ratio rises when small-caps outperform large-caps and falls when small-caps underperform. Note that this ratio bottomed in mid February and zigzagged higher the last five months. Thus, relative strength in small-caps is nothing new for stocks. On the chart, each peak was higher than the prior peak and each trough was higher than the prior trough. This is classic outperformance by one symbol against another. Relative strength in small-caps shows a strong appetite for risk in 2016 and this is positive for the market overall. 

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--Arthur Hill CMT

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Announcement from the Author

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Arthur Hill
About the author: , CMT, is a Senior Technical Analyst at StockCharts.com. 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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