Small caps saw some impressive strength while the market rallied off the Trump election. However, for the last two months, they have lagged.
This whole idea of less regulation and lower taxes sounds great for small business, but is it all talk? Let’s look at a couple of ratio charts.
Micro Caps relative to the S&P 500 have broken a nearly 3 year downtrend. Now the rally has given up half of it’s gains.
Micro Cap relative to the Small Caps have given up much of the move from the Trump Low. This ratio remains in a 3 year downtrend.
The one thing these two charts have in common is they are in great bounce spots. Maybe smaller stocks can start picking up the slack here.
Today we’re seeing IWM and IWC outperform. There’s little reason to think it can’t continue in the short term.
Trade ’em well!