Don't Ignore This Chart!

Small-caps Catch a Little March Madness


The S&P SmallCap iShares (IJR) held up better than the S&P 500 SPDR (SPY) during last week's decline and small-caps are outperforming large-caps in 2018. 

The chart shows IJR moving above its late February high with a surge above the blue zone in mid-March. The ETF fell back after this surge, but held above the rising 50-day SMA and did not close below the February high. SPY, in contrast, is below its late February high and its 50-day SMA. 

Even though I cannot draw a picture-perfect wedge or flag, the throwback looks like a short correction after a sharp advance. IJR is leading again today with a nice gain and break above the blue trend line. It looks like the six-day downswing is reversing and IJR is may challenge its prior highs. 

The indicator window shows the price relative (IJR:SPY ratio) surging to its highest level of the year this month. Note that this ratio rises when IJR outperforms SPY and falls when IJR underperforms SPY. The ratio fell from October to February and surged in March. The year is less than three months old, but small-caps are showing relative strength in 2018.    

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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