Hey, Ross here:
10-year Treasury yields hit a new high yesterday. And yet, the market was largely flat.
The most surprising thing? A nearly 3% gain in the beaten-down small-cap Russell 2000 Index…
Which as the Chart of the Day shows, could be signaling a market bounce in the small-cap sector.
Chart of the Day
As I’ve said before, the market recovery has largely been constrained to the large stocks.
And you can see this from the Russell 2000 Index, which is now only trading barely higher than it was in June 2022.
But what’s interesting here is the narrowing channel pattern the index has been reliably following for the past 15 months.
And as you can see, if the pattern holds, it means small caps have literally just started a short-term bounce…
And that’s an opportunity we can take advantage of.
Insight of the Day
Remember that all indexes are market-cap weighted, which skews perceptions and hides opportunities.
The TOTAL market cap of the Russell 2000 is under $2.5 trillion.
That means a single mega-cap stock like Microsoft or Apple is worth more than the entire index combined.
So it shouldn’t be a surprise that small-cap stocks could be moving in the entirely opposite direction than the S&P 500 – and most investors wouldn’t even notice.
The sheer disparity in size skews perceptions – and hides opportunities…
Because as I just showed you above, small caps look like they’re just starting to bounce…
And if you want to take advantage of this potential bounce…
Then your best bet could be to follow what the big institutions are doing.
Because you can be sure they’re not just investing in the mega-caps…
And their buys could have an outsized impact on the price of these smaller stocks.
Of course, they do their best to hide their trades…
But I developed a strategy that could allow you to get in right alongside them and profit from their money…
But don’t delay – because this bounce will likely be over very soon.
Embrace the surge,
Editor, Stock Surge Daily