Greg Guenthner

2012 featured more of the same from skittish investors.

They shunned risk. Instead, anyone interested in equities stuck to blue chips. Stocks paying a decent dividend received plenty of attention, while smaller companies were virtually ignored. Hesitant, fearful buying defined the collective attitude toward equities.

But something changed after the market began moving higher three months ago…

For most of 2012, small-caps and large stocks slogged through the ups and downs within spitting distance of each other. But since the market began to move off its November bottom, the Russell 2000 small-cap index has outpaced the Dow Jones Industrial Average by a wide margin…

Small Stocks vs. The Dow

Appetite for risk has abruptly changed. The Russell is up an impressive 18% since its November lows, while the Dow has risen about 11.5% during the same timeframe. Even as stocks consolidate this week, smaller names have not given up much ground to the big kids.

The last time we saw similar small-cap outperformance was in September 2010. In that case, a strong Russell helped propel a broad market rally lasting more than 10 months.

When investors show they are willing to take chances on some of the smaller, more volatile names on the market, stocks will continue higher.

Pay close attention to the Russell as stocks consolidate this week. If it fails to hold its ground, you’ll have an early signal to take profits…

Best,

Greg

Greg Guenthner

Greg Guenthner, CMT, is the managing editor of The Rude Awakening. Greg is a member of the Market Technicians Association and holds the Chartered Market Technician designation.

Recent Articles

NATO Meeting Gives You a Strong “Buy” Signal

Byron King

In early September, 2014 an important meeting was held at the posh Celtic Manor, in Newport, Wales. Heads of state were present. But it was the appearance of a Lockheed F-35B fighter jet that held the real story of what was going on... Today, Byron King pulls back the curtain on this meeting, and how you can use it to your advantage in the market. Read on...


What to Do When the Largest IPO in History Hits the Market

Josh Grasmick

The largest IPO in history is about to hit the market. And there's all kinds of speculation as to how it's going to pan out. Today, Josh Grasmick gives a definitive answer... and offers some advice on how to play this new stock for huge gains no matter what happens on day one of the IPO. Read on...


Laissez Faire
One Great Tip for Investing in 3-D Imaging Technology

Chris Campbell

By now you're likely familiar with 3-D printing. It's one of the most important tech developments of the last decade, and it's just getting started. But as Chris Campbell explains, there's another form of 3-D technology that could soon overshadow it. Read on...


A Unique Way to Play the Health Craze

Greg Guenthner

With the rise of the organic food market, people are becoming more and more health conscious, and thus, more aware of what goes into cultivating their food. But there's one aspect of this market that's long overdue for a massive overhaul, and that could present a very lucrative investment opportunity. Greg Guenthner explains...


How to Invest in a Strong Dollar World

Chris Mayer

Our friend Jim Rickards and founder Addison Wiggin believe the dollar will soon meet its demise. Chris Mayer, on the other hand, thinks the dollar will only get stronger this year and next. We'll let you decide for yourself. In this featured essay Chris lays out his train of thought and a guide for investing in a strong dollar world. Read on...