Small-Caps & Mid-Caps Break 2009 Uptrend Line

One of the simplest and easiest tools for technicians to use is the good old fashioned trendline. It sometimes gets forgotten about it and often misunderstood. Trendlines are drawn to connect both peaks and troughs within a trend. This process can be done in both uptrends and downtrends. Today we're going to focus on the major uptrend line from the 2009 US Stock Market lows.

Small-Caps and Mid-Caps are currently breaking these uptrend lines off their 2009 lows for the first time, while some of their larger-cap counterparts remain well above those levels. The first chart we're looking at is the Russell2000 Small-Cap ETF $IWM. Notice this week's action where the index is now first attempting a break of this major trendline:

Mid-Caps already broke this uptrend line in July and successfully retested that former support (now resistance) and is rolling over once again:

The large-cap S&P500, however, is still well above its uptrend:

I think it's important to compare the behavior of stocks with different market caps to get a better understanding of how money managers are allocating assets. Are they more inclined to speculate into the smaller, more volatile names in order to outperform? Or are they hiding in larger, less volatile names that will decline less during a correction in order to outperform?

Something to think about....

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Tags: $SPY $MDY $IWM