Want To Know Which Way The Market Is Going? Pay Very Close Attention To The Small Caps

Here are some interesting obervations from Waverly Advisors regarding the retracement of the correction that started on January 19th — a period we can still call the Scott Brown Correction.

First, markets haven’t fully come back, and second, small caps are killing big caps.

The strength of the market has been in the small and mid cap stocks.  The per cent
change chart below is pegged to the 1/19 highs and clearly shows the Midcaps’
leadership.  We continue to monitor this large cap / small cap relationship carefully
intraday.  At each and every point where the market might have looked weak, the
small caps quickly recovered and led higher into the close of the session.  Seeing the
small caps give up their strength would greatly strengthen our bearish convictions.  
Seeing the small cap indexes make new highs on the year would plainly say to the
bears, “you’re wrong.”


Photo: Waverly Advisors

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