Positive vaccine-related news from Moderna (MRNA) spurred a broad market rally Wednesday, causing a number of new buy signals across the board. This led the S&P 600 Bullish Percent chart (^BPSML) to reverse back up into X's, indicating that the offensive team is back on the field for small cap stocks.
The positive news from Moderna MRNA sent shares of the stock soaring to new highs in early market trading on Wednesday, hitting an intraday-day high of above $88 before backing off a bit. The news spurred a broad market rally causing a number of new buy signals across the board. The S&P 500 Bullish Percent BPSPX was up more than 9%, continuing a move higher in X’s. Additionally, other bullish percent charts like the S&P 600 Bullish Percent BPSML rose more than 7%, which triggered a reversal back into X’s at 58%. For much of the year, Small Cap stocks, in general, have laggard the broader equity market, but the move today in Small Caps puts the offensive team back on the field for these names and suggests much broader participation is taking shape in the market today.
The iShares Russell 2000 ETF IWM, through Tuesday, is still down 14% on the year compared to the S&P 500 SPX which is down less than 1%. With the recent strength in Small Cap stocks, the trend chart of IWM returned to a buy signal at $146. While the score of IWM is still below 3, the return to a buy signal for IWM is, at least, an initial positive development for Small Caps, in general.
Although the broader Small Cap space has seen improvement over the course of the past few months, the Small Cap Growth space remains the dominant style within Small Caps, as well as the broader equity market. As a matter of fact, a look at the US Size & Style rankings within the DALI shows Large, Mid, and Small Cap Growth in the top three positions in terms of their relative strength rankings. At the other end of the spectrum is Small Cap Value, which currently ranks in the last place. The leadership trend within Small Cap Growth versus Small Cap Value is also visible through the fund score. Below, is a historical fund score view of the iShares Russell Small Cap Value ETF IWN versus the iShares Russell Small Cap Growth ETF IWO. For the better part of the past three years, the fund score of Small Growth has been higher than Small Value. Even more recently as the score of Small Growth has pushed above the 5.00 level, the score of Small Value has stagnated a bit in the mid 1’s. All of this is to say, that while there is improvement afoot within the Small Cap space, it is the Small Cap Growth style that maintains a leadership position in the market.
