Small Stocks...Big Message

Look, I’ll be honest.
It’s a bull market.
Get in and hold on.

It doesn’t need to be more complicated than that.
Will people overcomplicate it? Absolutely.
But do you have to?
Not at all.

Have exposure. Manage risk. That’s the job.

And this week was another reminder as even the weakest areas of the market woke up.

Small caps have been the market’s punching bag for years.
And to be fair, it’s been warranted.

They didn’t come close to all-time highs in 2024.
They’ve been chronic underperformers.

Not to be Mr. Fundamental, but that checks out.

Variable rate debt in a rising-rate world.
Unclear growth runways.
And most quality companies go public after graduating from the IWM sandbox.

The deck’s been stacked against them.
IWM’s been left for dead.

But like I said a couple weeks ago:

Winning is a feature of bull markets.

The hard part?
Ignoring the noise.

Hopefully I’ve helped you do that.

So now that small caps and micro caps are breaking downtrends and reclaiming key levels?

You don’t fade that. You pay attention.

Nobody is buying small caps because they’re scared.

You buy these names when you’re chasing upside not when you’re bracing for impact.

Let’s talk charts.

$IWM ( ▲ 0.03% ) broke out of its downtrend, reclaimed a key horizontal polarity level around $210, and closed back above the AVWAP from recent highs. RSI, my personal favorite measure of momentum continues to hold above 50, highlighting the bulls having control of the tape.

That’s strength and trend development, in one of the weakest areas of the market…..

We’re even seeing relative outperformance vs. the S&P 500 as IWM reclaims its 50-day SMA on a relative basis.

You think that happens in front of a recession?
I don’t.

$IWC ( ▼ 0.01% ) , the MicroCap ETF, is showing a similar setup.

It broke out of a downward channel, reclaimed former support-turned-resistance, and is accelerating after recapturing its 200-day and the AVWAP anchored to recent highs.

This is bullish behavior plain and simple.

This isn’t the part of the cycle where I need to break down some big-brain statistical analysis to overcomplicate what the market’s already saying.

Bull Markets send clear messages.

You just have to listen.

Check out my latest appearance on Stock Market TV.

Proud to be working with this squad and excited for what we’re building in the ETF space.

ETFs offer massive benefits, especially for investors who aren’t glued to charts all day like I am.

Throw it on 1.5x and let it rip, let me know what some of your favorite ETFs are.

Be on the lookout this Sunday for the next edition of my newest research column.

The Sunday Stalk List

We had some bangers in Episode 1, and this week’s shaping up just as strong.

It’ll hit your inbox every Sunday.
If you’re not getting it yet, reach out and I’ll make sure you’re on the list.

Here’s a snippet from Episode 1 to give you a taste.

Cheers,

Larry Thompson, CMT CPA

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