Let’s begin off by reviewing a quarterly chart of the S&P 500 ($SPX), NASDAQ 100 ($NDX), and Russell 2000 (IWM) since this secular bull market started in early-April 2013 (44 quarters in the past):

S&P 500:

NASDAQ 100:

Russell 2000:

Once you take a look at these 3 charts, an apparent first conclusion could be made. If we’re in a bull market, we need to be invested within the NASDAQ 100 shares, which have dominated each the S&P 500 and Russell 2000. The 44-quarter price of change (ROC) supplies us roughly the positive factors made on every of those indices because the secular bull market started in 2013, 11 years in the past.

Earlier than we write off the small cap shares, nevertheless, we have to use some perspective and perceive that this asset class strikes into and out of favor. As a result of it is underperformed the NASDAQ 100 badly these final 11 years, it is smart to stay with NASDAQ 100 shares till small caps inform us in any other case. They could possibly be telling us in any other case proper now. Try this 11-year weekly absolute worth chart of the IWM and notice when it has outperformed the NASDAQ 100 previously:

Once we see key breakouts within the IWM, the group usually reveals relative power vs. the NASDAQ 100 – not less than for a number of months as much as a yr. That relative power generally will flip increased at bottoms simply earlier than key breakouts. The present sample appears to be trying similar to prior durations when the IWM went on a relative tear to the upside. Whereas the IWM has but to point out a ton of relative power, I created a Person-Outlined Index (UDI) that tracks the relative INTRADAY efficiency of the IWM vs. the QQQ (ETF that tracks the NASDAQ 100) and it is at present close to its highest stage since this big advance started in October 2023. In different phrases, present rotation is favoring the small cap IWM, which helps my concept that we’ll see outperformance by the IWM over the subsequent few months to a yr. Try this chart:

The IWM has carried out properly since 2013, however all of us have funding selections to make and we wish the BEST performers, or not less than I hope that is what everybody else desires. If I am invested in one thing that is going up, however underperforming, I really feel like I am leaving cash on the desk. So if I’ll chubby an space of the market, I have to see indicators that recommend it is a smart transfer. Proper now, the IWM is exhibiting these indicators. If and when these indicators reverse, then shifting again to an chubby place within the NASDAQ 100 makes a ton of sense.

So now that we’re lastly seeing some relative power from the beaten-down small cap group, let’s evaluation the place that small cap relative power is coming from utilizing an RRG and the Invesco small cap sector ETFs:

Small cap vitality (PSCE) and small cap industrials (PSCI) are the most effective two small cap sectors proper now as they’re the one two within the higher proper main quadrant, when in comparison with the S&P 500. Let us take a look at each these charts:

Vitality (PSCE):

It is arduous to not like small cap vitality proper now, particularly inside this bullish ascending triangle continuation sample. Finally, on a breakout, this is able to measure to 76-77.

Industrials (PSCI):

The PSCI has already damaged out and appears extraordinarily bullish, particularly if small caps, as a complete, proceed strengthening.

In my Saturday, March thirtieth Weekly Market Recap, I talk about many shares on this house, with a number of simply starting what seems to be a really robust uptrend. To tune in and watch this Weekly Market Recap video, merely CLICK HERE. If you happen to just like the video, please assist us out by hitting that “Like” button and subscribing to our channel in order that you do not miss future movies. Thanks!

Blissful buying and selling!

Tom