When we look at indices, we need to know where to look. Too...

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    When we look at indices, we need to know where to look. Too frequent we look at the main indices i.e S&P500, Nasdaq and Dow and then make a judgment as to where the market is heading.

    If you're into small and microcaps like I am (as I am not interested in blue chips*) , then it is the Russell 2000 (IWM) that we should be looking at. The Russell 2000 is the index for small caps.

    IWM as you can see in the link below is now at its All Time High.

    https://ycharts.com/companies/IWM

    If you recall a few months back, we felt like it was a fake rally because the main indices only rose on the back of FAANGMT stocks while most other stocks either went lower or stay pat. In other words, market breadth then was non-existent and the gains were merely confine to a handful of stocks which became subject of possible manipulation. That was part of the Trump put.

    The Trump put is now expiring if not deemed to have expired as far as the market is concerned. This time, market breadth is very visible and the indices are actually being held back by the big tech stocks winding back a little as we see rotation into value.

    If you look at the Table below, you can see how the IWM stacked up against SPX since the March lows. From the March lows to Sep 24, the IWM moved in lockstep with SPX, but since the end of Sept, the IWM has clearly outperformed the SPX by quite a considerable margin, resulting in the IWM:SPX ratio to improve by 11% from end of March to last Friday.

    Bottomline: The smallcap rally is on and is looking very bullish, validating my belief even further when I constructed the AGS (Assorted Growth Stocks Small caps) two weeks ago in advance.


    Column 1 Column 2 Column 3 Column 4 Column 5
    0   23 March 24 September 30 October 20 November
    1 RUSSELL 2000 (IWM) 99.90 144.67    153.09    177.50
    2 S&P500 (SPX) 2,237    3,247 3,270 3,558
    3 Ratio IWM: SPX 0.045    0.045 0.047 0.050
    4       23/3 to 24/9   24/9 to 30/10   30/10 to 20/11
    5 IWM Gain % 44.8% 5.8% 15.9%
    6 SPX Gain % 45.1% 0.7% 8.8%

    * the probability of making a higher short term return on small/microcaps is many times greater than that for blue chips and blue chips upside can be cut short by any failure to meet guidance or market expectations

    Chartist Andre Gratian thinks we would not see the next market low until 2022. Well, that seems to align with Dr Steve S Melt-Up thesis as featured here last month.

    GOLD

    GLD (gold-wkly), GDX (gold miners-dly)
    GLD has made an impressive move since it turned up its trend in July 2018.  For the past few months, it has been consolidating its gains in an orderly manner which does not reflect heavy selling but more likely profit taking.  Its oscillators show that it is not yet ready to resume its uptrend (GLD).  

    GDX is also correcting a sharp advance from the March low.  The correction is equally orderly and what could be some minor positive divergence is appearing in the CCI, suggesting that an end to the correction may be near.  Since this index has been moving in tandem with SPX, we should look to the end of the correction in SPX to start focusing on a potential coordinated end to the GDX correction (GDX).  
 
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