Small Caps Just Triggered A Major Breadth Thrust - Quick Note
This Signal Has Only Occurred 7 Times Since 1970s
In this article, we’re going to quickly cover a key signal that has just triggered for the US small caps sector.
Small-cap stocks have shown a big improvement in participation, with over 75% of Russell 2000 stocks now trading above their 50-day moving average.
This is an impressive rebound from a deeply oversold condition when fewer than 4% were above that level.
This surge indicates expanding market breadth and rising investor appetite for riskier segments of the equity market.
Such widespread participation across a diverse range of smaller, more economically sensitive companies typically occurs during the initial stages of a cyclical advance, signaling that the recovery is not limited to a narrow segment of the market but is instead gaining traction across a wider range of stocks.
As shown in the chart below, the Russell 2000 has delivered a 29% annualized return when more than 75% of its stocks are above their 50-day moving average.
In the next section, we’ll take a look at:
All the past signals that have occurred since the 1970s
A breakdown of small cap index returns across different timeframes following such a signal
The performance of the S&P 500 after such a breadth thrust on small caps
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