There have been rumblings of “the return of small caps” for many moons, but small-cap leadership has still not materialized as we kick off the new year. Today we’ll share three charts to watch, besides the obviously important chart of the Russell 2000 ETF (IWM), to determine when a new leadership phase for small caps is imminent. The chart of IWM itself appears to be in a neutral state, similar to what we’re observing in the other major equity indexes. A long-term trendline using the October 2023 and August 2024 lows has been violated, but this week we saw a bounce right back above this level. IWM has bounced off the 200-day moving average, as well as the 38.2% retracement of the 2024 bull market, but it still remains below its 50-day moving average. Financials are One of the Top Sectors in Small Caps While the S&P 500 is dominated by the technology…
