Small-Cap / Large-Cap Stocks Indicate Market Sentiment — Negative Now

The ratio of the price of smaller company stocks to larger company stocks provides a daily real-time investor sentiment indication that is worth observing.

These charts measure the percentage performance of each market-cap size to the Russell 1000 large-cap index (proxy: IWB).

The capitalization sizes compared to the Russell 1000 are:

  • small-cap (proxy: IWM) — Russell 2000 small-cap
  • mid-cap (proxy: MDY) — S&P 400 mid-cap
  • large-cap (proxy: (IWB) — Russell 1000 large-cap
  • larger-cap (proxy: SPY) — S&P 500 large-cap
  • mega-cap (proxy: OEF) — S&P 100
  • xtra-mega-cap (proxy: XLG) — Russell 50

Multi-Year Since March 2009 Market Low

Small-cap and mid-cap rose (positive slope of performance lines) relative to the Russell 1000 from the 2009 market low, through the flash crash and European problems in 2010. However, near the end of Q1 in 2011, small-cap and mid-cap underperformed the Russell 1000 (negative slope to relative performance lines), presumably due to fears of Europe slowing the world economy, and potentially spilling over to the US banking system.

1-Year Monthly

The under-performance (negative slope) of small-cap and mid-cap is clearer in this 1-year monthly view; as investors moved to greater perceived safety of the larger-cap, mega-cap and xtra-mega-cap stocks (positive slopes).

3-Months Weekly

During the past 3 months, the weekly data shows a burst of stock market confidence evidenced by the sudden out-performance of small-cap stocks (and substantial relative improvement of mid-caps) in the second half of June.  However, the was only a burst, which quickly faded.

1-Month Daily

Over the past month, the daily charts clearly show the relative strength of the larger-cap, mega-cap, and xtra-mega-cap stocks; and the relative weakness of the mid-cap and small-cap stocks.

Don’t confuse relative performance with absolute performance.  The overall US stock market is still in an up trend from non-trader investor perspective, as this weekly chart of the Russell 3000 index since the March 2009 stocks market low shows (40-week moving average shown in dashed gold).


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