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Small-Cap ETF Leadership Gives Bulls Hope

tlydon@globaltrend.com (Tom Lydon)

U.S. stocks have moved higher the past month and the outperformance of small-cap ETFs versus the S&P 500 shows investors are willing to take on more risk.

For the month ended July 6, the small-cap iShares Russell 2000 (IWM - News) was up 5.9%, compared with a 3.2% gain for the S&P 500, according to Morningstar.

“The small caps have been outperforming since mid-June. Strength from this field is encouraging as they typically lead the market higher,” says Investors Intelligence technical analyst Tarquin Coe. [An Overview of Small-Cap ETFs]

“On the iShares Russell 2000 chart the 50-day exponential moving average is turning up following a test of the 200-day EMA, indicating the start of a new uptrend,” he wrote in a newsletter Monday.

iShares Russell 2000

The chart below shows the relative performance of the small-cap ETF against the S&P 500: