To gain an edge, this is what you need to know today.
Opportunities In Small And Micro Caps
Please click here for an enlarged version of the chart of iShares Russell 2000 ETF (ARCA: IWM) which represents small cap equities.
Note the following:
- The chart shows small caps are still well below the high from 2021. This is occurring at a time when S&P 500 is well above its 2021 high. Nasdaq is even higher.
- The chart shows a breakout attempt earlier this year that failed.
- The chart shows small caps are at a resistance level.
- If small caps can breakout from here, potentially, there is a significant opportunity. The disparity between S&P 500 and small caps will ultimately be resolved by either small caps moving much higher or S&P 500 moving lower.
- A part of the problem with IWM is that it contains a large number of small banks that have exposure to commercial real estate. On the other hand, the momo crowd’s AI darling Super Micro Computer Inc (NASDAQ: SMCI) has become a major force behind day-to-day moves in IWM.
- The Fed’s decision to shrug off inflation is positive for small caps and micro caps.
- As a full disclosure, both small caps and micro caps are in the ZYX Allocation Model Portfolios by The Arora Report. This is where you will find the buy zones.
- Prudent investors need to be aware of the conventional wisdom and the consensus. However, prudent investors should be equally aware that the conventional wisdom and consensus are often wrong. When investors incorporate this simple observation, it dramatically improves the results they can achieve. There is a perfect learning moment at hand. The conventional wisdom as well as the consensus was that Apple Inc (NASDAQ: AAPL) is so beloved that investors would simply shrug off the antitrust lawsuit against Apple. That conventional wisdom and consensus has proven wrong. Yesterday, ...