Small-Caps Break Out To All-Time Highs!

JC Parets
September 28, 2017

I'm back from a 2-week trip to Asia and it's almost like nothing has changed. Stocks are hitting all-time highs, so many people are trying to be cute calling for a top and the gold bugs are angry. The difference is that now the Small-caps have finally broken out of a 10-month base to new all-time highs. This goes for the Small-cap Russell2000 Index, S&P Small-cap 600 Index and the Russell Micro-cap Index. These indexes have done nothing in almost a year. Can you imagine the nerve of some people to call the US Stock Market "Stretched" or "Too far too soon" (whatever that means), when some of the most important indexes are just now breaking out of 10-month bases? Too far too soon? They've gone no where for 10 months? Are you kidding me?

It's like I'm talking to a wall sometimes. Too Stretched? Are we looking at the same market?

Here is Russell2000 Small-cap Index Fund $IWM. I'm not sure what you see, but I see an index made up of 2000 companies that hadn't done anything since last December. Now, we're breaking out to a new all-time high. The way I learned it is, the bigger the base, the higher in space:

We cannot be short or even underinvested if we are above all of those highs since last year. This is still a buy any weakness market.

Next is the S&P600 Small-cap Index also breaking out of a major base. This one is much cleaner than the one above because it is built differently. But the point is the same. Monster base, and now a breakout! How the hell can we not be aggressively buying stocks if this index is just now breaking out to new all-time highs????

Finally the Russell Micro-cap Index. Same story: Major base and fresh breakout after not doing anything this year.

I don't know what else to tell you guys that I haven't already told you. We're in a strong bull market, sector rotation does not stop and we only have leaders to the upside, not the downside. What is the sector "dragging" this market lower? How many sectors are pulling it higher? Think about that for a second.

If we're above the former highs in these 3 indexes, we need to be very long. Like I've been saying this summer, I don't just think stocks go higher, I think they go a lot higher.

I don't see the point in getting cute and buying garbage like Bonds and Precious Metals. They're losers. Other than maybe a quick mean reversion trade for a few days, if you're into that sort of thing, there is no reason to buy those other assets. We need to be buying stocks. Period.

Cheers,

JC

 

 

 

Tags: $IWC $IWM $RUT $TF_F

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