I'm looking for a tell that this leg of the rally is done, and a timeout is likely to ensue.
My best guess is to watch the compression of returns between small-mid caps and large caps. When you see the SMID caps treading water and the large caps playing catch-up (especially if it is in a hurry), then there is a good chance a reversal is not that far away. Panicked buying is always a good sign.
The rationale for this is the fact that the SMIDs have led this rally from the beginning (SMID is up 17% YTD v 9% for the S&P 500 - a carryover from 2009). When their leadership begins to falter, then that is a sign the market is losing steam, and a more cautious tone is taking hold.
Within the SMIDs, consumer discretionary and financials have been the leaders this year (up 30% and 18% respectively). So watch them closely for an early sign of slippage.
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