Small- and Mid-Caps Are Measuring Stick For Next Market Move

Welcome to Karpel’s Corner. This is where I throw out my thoughts on the markets and share some of my favorite strategies. I keep it market-focused, and never miss an opportunity to teach trading strategies and commentate on the latest trends affecting the financial markets. Hope you enjoy today’s post!

The Season is upon us, or perhaps I should say the seasonality is on. 

Typically at this time of year, late September/early October, we start to see that the small- and mid-cap stocks underperform in front of the holiday shopping season. This makes sense since most of these stocks are the domestic and would be affected by the trends like the shopping habits of the US consumer.

Right now, the large cap names are grinding higher, but the small caps are lagging. Now, this could just be a symptom of uncertainty on the global markets, mainly the EU, and the fact that we have not had any meaningful pullback in almost 5 months. It also could be a red flag, especially if the underperformance in the small caps starts to actually deviate from the overall market trend and go negative.

I want to keep an eye on small- and mid-cap names, this will help me gauge if a pullback is eminent or a January bounce is in the works.

Have a good beginning to the trading week. See you next time at the Corner!