Given the performance of small caps, we will take a look under the hood at recent leadership from a sector standpoint through a relative strength lens.
Though U.S. indices kicked off the week mixed, small caps by way of the Russell 2000 (RUT) were among those to remain positive (albeit very slightly) and continuing positive action from last week. As discussed in Friday’s feature in the Daily Equity Report, small caps have been among, if not the best performing of the size groups during 2026. While not handily outpacing its large and mid-cap counterparts, small caps have likely been a part of client portfolios. Given the performance of small caps, we will take a look under the hood at recent leadership from a sector standpoint through a relative strength lens.
The relative strength matrix below compares price action of the nine Invesco small cap sector ETFs against each other in order to identify which sector funds are showing leadership, while also showing what sectors should be avoided. Given the action seen within the broader energy sector to kick off 2026, its no surprise to see the small cap energy matrix rankings mirror the broader NDW DALI Sector Rankings with energy as the top sector from a long-term leadership perspective. With the technology and industrials ETFs ranking in second and third, the small cap matrix similar mirrors DALI from a long-term RS perspective. When examining the short-term RS (column of Xs), technology and industrials exhibit superior near-term relative strength against the majority of the other ETFs within the matrix, while energy currently maintains the lowest X ranking with zero RS charts in a column of Xs when comparing to other small cap sector ETFs in the Invesco lineup.
Given the current RS picture among the small cap sectors, below highlights the current technical characteristics of the three aforementioned sector representatives.
Invesco S&P Small Cap Energy ETF (PSCE) – PSCE has maintained a positive trend since August 2025 and a buy signal since October of last year. After giving a third buy signal in January, the fund continued higher in February and March, reaching a multi-year high at $63 before pulling back to kick off April. That pullback to kick off April while other sectors have rallied – some significantly – in comparison has provided enough dispersion to lead to the ETF to fall in X ranking within the Invesco Small Cap Sector matrix shown above. Additionally, the market RS chart comparing the ETF to the S&P 500 Equal Weight Index (SPXEWI) reversed into Os on 4/14, highlighting that near-term laggard stance. Although the near-term RS picture is out of favor for PSCE, the long-term trend picture continues to maintain. Last week’s action brought the chart back to a column of Xs, while yesterday’s trading brought the chart above $62 and just one box below the March rally high. Near-term support currently lies at $56, while the bullish support line sits at $43.50 on the default chart.
Invesco S&P Small Cap Information Technology ETF (PSCT) – PSCT has maintained a positive trend since May 2025 and returned to a buy signal earlier this month. The past couple of weeks’ worth of trading has carried the fund higher, leading to a new all-time chart high at $74 during Friday’s (4/24) trading. As highlighted above, the recent rally within technology has brought near-term RS to favor the sector, again matching the superior long-term RS that has been sustained since the late stages of 2025. This week’s trading has seen the fund pullback slightly and it is now on the threshold of actionable territory at $70, while a further pullback to the upper $60s would constitute healthy chart action. From here, prior resistance in the mid $60s may be seen as initial support, while additional support resides in the $57 to $58 range.
Invesco S&P Small Cap Industrials ETF (PSCI) – PSCI has maintained a positive trend since July 2025 and returned to a buy signal earlier this month. Action in recent weeks has witnessed the fund rally through the $160s and above $172 on the chart, just a few boxes below the all-time chart high from February at $178. PSCI has maintained superior long-term relative strength against the market, as defined by the S&P 500 Equal Weight Index (SPXEWI), since late 2023 and positive near-term RS since August of last year. Among the three small cap sector funds discussed, PSCI is the one that could be considered at its current chart position or on a pullback to the lower $160s. Initial support lies at $150, while additional resides at $140.
A possible solution for those pondering how to best navigate the small cap space is the Invesco Small Cap Sector Model (POWERSMALL), which seeks to maintain exposure to the top three sectors within the nine funds shown in the matrix above and currently holds the three ETFs discussed above. Year-to-date, the Invesco Small Cap Sector Model has gained 22% through Monday’s (4/27) close and has outperformed the Russell 2000 (RUT) by more than 10%.
