SMALLER STOCKS ARE LEADING THE MARKET HIGHER -- S&P SMALL AND MIDCAP INDEXES NEAR UPSIDE BREAKOUTS -- THE S&P 500 SHOULD FOLLOW THEM HIGHER -- NASDAQ STRENGTH IS ALSO A POSITIVE SIGN
SMALL AND MIDCAP STOCKS INDEXES CLEAR 50-DAY AVERAGES... Last Wednesday's message pointed out that smaller stocks were leading large caps lower. Small and midcap indexes had fallen below their 50-day average which increased odds that the S&P 500 would do the same, which it did. Today, we're seeing smaller stocks leading the market higher. Chart 1 shows the S&P 600 Small Cap Index trading over its 50-day average for the second day in a row, and close to the highest level in a month. Chart 2 shows the S&P 400 Mid Cap in a similar strong position. That increase chances that the S&P 500 will follow them higher.
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Chart 1
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Chart 2
S&P 500 IS TRADING NEAR DAY'S HIGH -- QQQ CONTINUES TO LEAD... The daily bars in Chart 3 show the S&P 500 Large Cap Index slightly lower on the day, but trading near the day's high. With smaller stocks trading over their 50-day averages, there's a strong chance that the S&P 500 will soon do the same. Continued upside leadership by the Nasdaq market is also a positive sign. Chart 4 shows the PowerShares QQQ (representing the technology dominated Nasdaq 100) in positive territory and well above its 50-day moving average. That's another plus for the S&P 500 and rest of the market.
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Chart 3
