Small-caps have been left for dead. Nobody wants to touch them, and sentiment couldn’t be more lopsided.
That’s exactly what makes this moment so interesting.
When positioning gets this extreme, the unwind can catch people off guard—and the price action can be explosive.
We find it hard to believe small-caps won’t assume some kind of leadership role before this bull market is over.
If you go and study previous cycles, almost every major run this century has seen them leading, at least for a stretch.
We don’t think this cycle will be different. We just think it hasn’t happened yet.
Take a look at where the Russell 2000 ETF $IWM stands relative to the Russell 1000 ETF $IWB— it's back at the same support levels we last saw 25 years ago.
If small-caps are going to start outperforming, this is the most logical place for it to happen.
Momentum is backing it up too. The weekly RSI-14 has been diverging positively for a while, adding conviction to a potential bounce.
After years of lagging, small-caps finally have the setup they need.
Whether it turns into a major shift or just a powerful short-term move, we think these stocks still have a role to play before this bull cycle is done.
Strazza has already seen big winners in some of these small-cap names inside Breakout Multiplier over the past few weeks.
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