SMALL CAPS AND TRANSPORTS LEAD TODAY'S RALLY -- RUSSELL 2000 iSHARES NEAR TEST OF 2018 PEAK -- RUSSELL 2000 GROWTH ISHARES HIT NEW RECORD -- WITH HELP FROM BIOTECHS
RUSSELL 2000 ISHARES NEAR NEW RECORD... Small cap stocks are having an unusually strong day today. And are nearing a potential new record. The weekly bars in Chart 1 show the Russell 2000 iShares (IWM) trading at the highest level in sixteen months; and nearing a test of its previous high reached in August 2018. The IWM/SPX ratio in the upper box shows small caps lagging behind large caps for more than a year. It's a good sign, however, to see smaller stocks starting to turn up as well. That's a sign that the stock market rally is broadening out.
SMALL CAP GROWTH BREAKOUT... Chart 2 shows where most of today's small cap strength in coming from. The weekly bars show the Russell 2000 Growth iShares (IWO) having already cleared its 2018 peak to hit a new record. The biggest parts of the IWO are healthcare (30%), industrials (19%), technology (17%), and cyclicals (12%).
SMALL CAP GROWTH LEADERS... The Invesco S&P Small Cap Industrials ETF (PSCI) is one of the day's strongest ETFs and is nearing a test of its 2018 high. That's where some of today's IWO buying is probably coming from. A lot of the recent gains also appear to have come from a revived biotech group.
SMALL CAP GROWTH RISES WITH BIOTECH STOCKS... The black weekly bars in Chart 3 show the Biotechnology Index rising above a falling trendline extending back to the summer of 2018; and nearing a major upside breakout of its own. The chart shows a very close correlation between the BTK and Russell 2000 Growth iShares which is the solid gray area. Notice how often they have peaked and troughed together over the past two years. And the fact that both started rallying together at the start of October. And both appear to be in the process of breaking out to the upside together. In addition, their 26-week Correlation Coefficient in the lower box is currently at a very high reading of .95. That's a pretty clear indication of two markets moving in lockstep with each other.
DOW TRANSPORTS ACCELERATE TO THE UPSIDE...Another lagging group is starting to play catch-up to the rest of the market. The weekly bars in Chart 4 shows the Dow Transports trading at the highest level since mid-2018 and in the process of achieving an upside breakout. It's being led higher by airlines, rails, and truckers. The recent drop in energy prices may be helping this fuel-sensitive group. With the Dow Industrials hitting another record high today, Dow Theorists should be happy to see the transports starting to move higher as well. The ratio in the upper box shows the transports trailing behind the Dow Industrials all year. It's encouraging to see them both finally rising together.
EXPD DELIVERS A NEW RECORD... The daily bars in Chart 5 show Expeditors Intl of Washington (EXPD) hitting a new record today. That delivery service stock is the day's biggest percentage leader in the Dow Transports.
