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Will Small Caps Take The Lead?

ByGeoff Bysshe
Published 12/09/2019, 05:03 AM
Updated 07/09/2023, 06:31 AM
SPY
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QQQ
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HG
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IWM
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XLF
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OIH
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XLV
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SMH
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After a two-day correction back to its breakout level, the Russell 2000 ETF (NYSE:IWM) vaulted to new 52-week highs on the back of an employment report that surprised even the most bullish analysts.

Last week’s price action revealed some very interesting shifts in market leadership.

IWM Weekly Chart

Here's what to watch from markets, sectors, and indicators to confirm whether these shifts will become the new trends:

  • Risk Gauges turn bullish

  • IWM retraced to test 160 breakout level, and then rallied back to new 52-week highs.

  • SPY and {QQQ rally, but don’t make new 52-week highs, despite AAPL and GOOGL having big moves.

  • The biggest volume days were two down days – Monday & Tuesday.

  • Big Banks (NYSE:XLF) and Healthcare (NYSE:XLV) show leadership while Semiconductors (NYSE:SMH) lagged.

  • Energy (NYSE:OIH) looks poised to rally after 6 months of basing out.

  • Copper (JJC) and the commodity ETF (DBA) are trying to break out of low bases.

  • Market internals suggest that last week’s 2-day sell-off may have been enough of a rest for the market to push higher.

    • December has a reputation of being a bullish month, but it’s often a bumpy ride. As long as the markets stay above last week’s low the bulls should be in control.

    December can also set up patterns that help define big trend trades that start in January.

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