Spread: Small Caps vs Large Caps (USA)


Profile: Dow Jones US Small caps versus Dow Jones US Large caps.

Note: relative performance of Y versus “Z”. A rising chart means “Y” is outperforming “Z”. The spread says nothing about the absolute performance of either “Y” or “Z”.

Although we are considerably bearish for the broader market as a whole, we do see a decent opportunity for investors that need to maintain some kind of long-exposure in the US market.

The long term down trend of the spread is most likely coming to an end. Minor bullish divergence in combination with an outspoken bullish daily chart suggest a much larger recovery is getting under way. A recovery towards ~2 is expected over the coming weeks and months.

  • Outlook: Expected outperformance for small caps
  • Strategy: switch from large caps to small caps or overweight small cap stocks

Spread: DJ-US Small Caps vs DJ-US Large Caps Index (USA). Ratio 1:1