Research Excerpts

Chart Of The Week: Market-Leading Small Cap Looks Tired

Posted on: Tuesday, April 9th, 2013

The following (green font) is one of the 32 charts and corresponding commentary/analysis/strategy from our April 2013 US Financial Market Chart Book (access requires subscription).

“Chart Book”, one of 8 different reports that we produce for subscribers at various intervals throughout the month, is a monthly collection of key charts that focus on a broad array of financial asset prices and related data that collectively convey our best investment ideas for the next one to several months in the US stock market and sectors, US interest rates, the US Dollar, and in economically influential commodities like crude oil and copper.

It includes a 20-25 minute video in which John Kosar, Director of Research, discusses the implications of each chart and how they are likely to affect the direction of asset prices.

Excerpt From: US Financial Market Chart Book
Asset Class: Small Cap Stocks
Topic: Relative Performance
Date: April 2nd, 2013

Relative Performance: Small Cap Is Played Out

The Russell 2000, which has led the US stock market higher from the
November lows, is quarterly overbought vs. the S&P 500 and vulnerable
to upcoming relative underperformance.

The chart shows that Small Cap stocks have led and fueled the current November advance in the US broad market as the Russell 2000 (RUT) has outperformed the S&P 500 (SPX) by 7% between November 13th and March 28th.  However, the Russell has actually underperformed the S&P 500 by 2% during just the past 2 sessions, and remains vulnerable to more upcoming weakness.

This is important because if the Russell is through leading the broad market higher, another sector of the market must step up to take its place for the November broad market advance to continue.  Put another way, without some new leadership — and soon — the current broad market advance will fail.

We discuss this market leadership issue, and how we think it is likely to be resolved in the upcoming weeks, in our latest research.  Subscribers can log into the Research Center to view it.

We periodically publish a brief excerpt like this one, taken from one of our 8 premium research reports, as a means to stay on the radar screen of professional investors like you that have previously expressed an interest in Asbury Research.

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