Are the Mid-Caps Finally Ready for Their Moment?
Many are now recommending this group, so let's take a close look. Plus, 'saving' isn't only happening with big tech stocks, why the VIX should be on your radar, and more!
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While the indicators have been mostly stagnant over the last six or seven weeks, the S&P 500 is up 6%. While the indicators have been mostly stagnant over the last six or seven weeks, the Russell 2000 has been up about 10%.
There has been a lot of movement under the hood, though. There are small-cap stocks that are up 50% while there are what used to be large-cap stocks down 20% or 30% (see staples and drugs and restaurants).
Just look at the Mag 7. While I still don’t know which stocks exactly are those seven I do know that Meta META, Microsoft MSFT, Amazon AMZN (which broke the line I highlighted Tuesday) and Nvidia NVDA have not made a higher high while the S&P has climbed 6%. Of course Apple AAPL and Tesla TSLA have done most of the heavy lifting there.
But this caused me to look once again at the mid-caps. I notice there are a lot of folks on TV calling for a broadening out of the market now that we’ve had a rate cut but they don’t love the Russell 2000 because there are "so many unprofitable companies" in it. Thus they recommend the mid-caps.
The SPDR Midcap 400 ETF MDY has not made a higher high since the first week of September. It is also in danger of breaking that uptrend line that has been in place for two months now. The span between the high and the low is pretty tight (small) but I’d keep my eyes on $590 on the downside and $610 on the upside. A break either way would be of interest to me.
My preference (always) is for a break to the downside so that we can get a shakeout to that green line — and maybe, just maybe, change the indicators!
And just in case you thought that the only place we see saving is in big technology stocks, that’s not the only place we see it. Tuesday saw it in the staples. You see that break on Monday? A gap down, closing on the low and then Tuesday gets us a minor lower low and a reversal.
That’s how we get the indicators going nowhere and the group rotation. They fall a few bucks and get saved. They rally a few bucks and stall out. And the handful of small-cap tech stocks party like it’s 1999.
In the meantime, the VIX has been creeping up for several days now and hasn’t made a lower low. Maybe it’s just the time of the year but this too should be on your radar.
