Small-caps are back on my radar this week as they try to reclaim leadership versus large-caps.
While they’re the smallest stocks in the market—when they move, they carry real information.
Think of small-caps as a proxy for market breadth—they represent a wide swath of the market, from regional banks to biotechs, industrials, and other other smaller players across the board.
When you look at every major market bottom this century, it has been followed by small-caps stepping up and leading the way at the start of a new leg higher—at least for a time.
That’s not a coincidence. It’s a clear signal of the underlying health and breadth needed for a rally to gain traction, reflecting broad market participation beyond the large-cap giants.
Right now, the Russell 2000 vs. Russell 1000 ratio is holding above a critical long-term support.
We’re exactly where this ratio kicked off 25 years ago.
In addition we’re seeing a bullish momentum divergence with the weekly RSI holding higher lows.
That kind of setup, especially at key structural support, often marks major turning points.
If small-caps are going to show relative strength and kick off a new cycle of outperformance, this is a logical place for it to start.
Under this scenario, it could mark the beginning of real expansion—the kind of broad participation the market needs right now to confirm that a major bottom is in.
Steve just shared two of his top picks from our bullish momentum scan, exclusively for ASC Premium members.
