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Small Cap Stocks…a longer lookback 230506

As a supplement to yesterday’s post, the below chart is a longer lookback at Small Cap stocks. 

Note the area that’s circled.  It’s rare that the index hugs its 1,000 day moving average (dma).  The concern is that a drop below the 1,000dma generally indicates a recession and that more bad things are yet to come.  For now, the index is just slightly below its 1,000dma but on a positive note, the 200dma appears to have found support at this level.

If the Small Cap index and its 200dma drop below the 1,000dma for a sustained period of time, then the Market is likely in for a steep selloff.

On the other hand, and from the perspective of the S&P 500, watch the 4200 level.  That’s roughly the halfway retracement point from the Jan ’22 high to the Oct ’22 low.  If the S&P 500 can hold above that resistance area, then the worst is likely over.  For now, the S&P 500 hasn’t been able to get above that level since Aug ’22.

So, will the Market breakout or breakdown?  No one knows.  Be patient.

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