Will Small Caps Hold the Market Back?

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!

In past corners we have discussed that weakness in small-caps ($IWM) is negative for the broader market ($SPY). But does this relationship still stand today?

I looked at the Small-Cap Index ET ($IWM) and compared the performance to the S&P 500 ETF ($SPY) for the last seven years. I found the $IWM in lock step with the $SPY.

Now what is interesting is we see the small-caps have been basically flat compared to the red hot Big-Cap ETF, ($SPY).
The last time we saw that type of performance was in the summer of 2008. This has not put fear in the Big-Cap Indices, ($SPY).

If you are looking for stocks to buy at this stage, big-cap names, not small-cap, are the names to look to. This could change if we see small-caps start to gain more strength to the upside.

See you next time at the Corner!