Small- and Mid-Caps Step Into the Spotlight

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On Monday, stocks’ performance was in stark contrast to last week’s sluggish advance. Yesterday, the S&P 500 gained 0.6%, its best performance in over two weeks. The Dow Jones industrials gained 0.24%, and the Nasdaq rose 1%.

Gains in the S&P 500 were led by the following sectors: Financials (+1.2%), Consumer Discretionary (+1%), Energy (+0.7%) and Technology (+1.0%). The chip-making stocks revived and sent the PHLX Semiconductor index up 1.2%. And biotechnology stocks did well during the session but gave back much of the hard-won gain. At the close the iShares Nasdaq Biotechnology Index (ETF) (NASDAQ:IBB) gained 0.5%, but at mid-day it was up almost 1%.

Despite the rise in energy stocks, crude oil also gave up a 1% gain, closing at $51.79 per barrel, up just 0.2%.

At the close, the Dow Jones Industrial Average gained 46 points at 19,216, the S&P 500 rose 13 at 2,205, the Nasdaq jumped 53 points to 5,309, and the Russell 2000 rose 24 points to close at 1,338. The NYSE’s primary exchange traded 942 million shares with total volume of 3.9 billion shares, and the Nasdaq crossed 1.8 billion shares. On the Big Board, advancers outpaced decliners by 2.5-to-1, and on the Nasdaq, advancers led by 3.1-to-1. Blocks on the NYSE increased to 5,112 from 4,805 on Friday.

Russ 2000 (IWM) small break flat vol
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Small- and Mid-Caps Stepping Into the Spotlight

The iShares Russell 2000 Index (ETF) (NYSEARCA:IWM) represents the “small-cap” stocks. This group of stocks led the advance for most of the year, but last week pulled back on light volume. Yesterday it appeared to pick up steam again when the ETF opened a small upside gap, breaking from a flag, but supported by only average volume. Can it follow the SPDR S&P MidCap 400 ETF‘s (NYSEARCA:MDY) lead and also break to a new high?

S&P mid-cap (MDY) breaks from flag
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The mid-cap stocks of the S&P showed life yesterday by both breaking from a bullish flag, but jumping to a new high. Volume was slightly above normal. Support is at Thursday’s low at about 295.

Conclusion: It appears that there may be a shift to small- and mid-caps as part of the normal rotation following a major breakout. Meanwhile traders should be going for the long side of the market with the expectation that the near- and mid-term trends are resolving in favor of the bulls. But taking profits is still part of being a successful trader, as well as going for the active sectors with profits earned from good timing.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2016/12/small-mid-cap-spotlight/.

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