Small-cap stocks have been lagging the market recently.
Miller Tabak's Jonathan Krinsky brings this to clients' attention today, writing, "G enerally, when the small-caps show relative weakness vs. the large caps, it is a sign that investors are moving out of the riskier/high-beta names and into the 'relative safety' of the large/mega-caps."
Perhaps the best way to see this rotation out of small-caps and into large-caps is by charting the ratio of the Russell 2000 (a small-cap index) to the Dow Jones Industrial Average (an index of large-caps).
When the ratio goes down, investors are moving into bigger, safer names. That's what is happening right now.
Krinsky points out that this ratio peaked in February 2012, before the S&P 500 ultimately peaked in early April, as shown by the arrows in the chart below.
The chart also shows that the Russell 2000/DJIA ratio has peaked again and appears to be headed lower.
"This is by no means a guarantee of a market top of course," says Krinsky. "We saw this ratio plunge from July to August 2012, even as the S&P grinded higher."
This time, it might be saying something prescient, though, given the fact that the market rally hasn't really faced a major test yet.
"When put in context, however, and combined with many of the other factors we have been highlighting, it should certainly be given some consideration," says Krinsky.
More From Business Insider