Before I dive into it, let’s zoom out and look at the biggest picture.
Here’s SPY’s weekly chart:
No explanation needed here, really.
At this rate, S&P 500 can retrace around 10% and still(!!!) maintain the uptrend, based on my chart analysis. Of course, the market moves fast and this isn’t set in stone. The S&P 500 can retrace 10%, then trade sideways, and dip more, then the trend would be “broken”.
I’ll just have to wait and see what happens.
Now, there still are a good deal of people trying to make a bear case….
Well, I’m not even going to get into this debate until we have a weekly close below February’s highs.
We’re in a full on bull market, no doubt in my mind, question closed.
Let’s now move on to the juicy part…
Small Caps Firing On All Cylinders
It is no news (to my readers, at least) that there’s been a considerable rotation down the market scale.
I noted this about 3 weeks back, right as micro- and small-caps were starting to show signs of outperformance.
Well, here’s where we stand today, a short while later:
I could’ve said there’s very strong momentum to the upside, but don’t want to state the obvious.
This might seem overextended, but keep in mind the subgroup has done virtually nothing for 18 whole months.
As long as the current breakout maintains, I view this as bullish for small-caps.
The accelerating momentum thesis is further confirmed if you looked at small-cap growth oriented stocks.
Much like it’s broader sister-index, PCST remains historically elevated and is now accelerating its extension on both absolute and relative terms.