By: Costas Bocelli — September 18, 2019

Are Small Caps About to Stage a Big Time Rally?

It’s time to bring the offense back onto the field!


After a month-long slump in August, demand has regained control of the stock market again.

The NYSE bullish percent index (BPI), the granddaddy of all stock market indicators, recently flipped back to a column of X’s and returned to bull confirmed status.

The NYSE BPI measures the percentage of stocks within the NYSE Composites that are trading on a point and figure "buy" signal.

And when the most recent column is O’s (and falling) this tells us that more stocks are moving to sell signals and that supply is in control.

But when the most recent column is in X’s and rising (like it is now), this tells us that more stocks are moving to buy signals and that demand is in control.

(Click any image to enlarge)

nyse bpi

And just last week, the NYSE BPI reversed back to X’s, confirming the rally in the major stock market averages we've seen since the Labor Day holiday.

The S&P 500 has traded back above 3,000 for the first time since late-July.

As for the Dow Jones Industrial Average and the Nasdaq Composite, they too have erased the August declines.

Since the start of September all three indices have gained +2.5%.

But the real story lies with the relative strength in Small Caps.

You see, the Russell 2000 Small Caps index has more than doubled those returns and gained +5.3% during the same period.

Have a look at the comparative performance of the Russell 2000 versus its “big brothers” since the Labor Day Holiday.

indice performance

That is impressive outperformance and could be just the start of a larger trend as we move into the fall.

You see, while their “big brothers” are now approaching the prior record highs from late-July, Small Caps have some serious catching up to do.

If we look at the iShares Russell 2000 ETF (IWM), you’ll see that the Small Caps are still 9% below its previous all-time high from late-August 2018.


Since the winter correction that began in earnest in September 2018, $158 in the IWM has served as a significant level of technical resistance.

The rally currently taking place in the Small Caps marks the fifth attempt to break this overhead barrier of resistance.  And if it breaks out this time, investors could quickly grab another 9% in gains if the momentum takes it to those prior highs.

A potential 9% profit is nice...

But generating double-digit returns or more while you’re waiting sounds even better, wouldn’t you agree?

And that’s exactly the kind of returns you could have made acting on the stock recommendations of our very own “Big Bill” Spencer, the editor of "Small-Cap Saturday".

Here are just some of Big Bill’s profitable recommendations…

  • LivePerson (LPSN)…+17.5%
  • Sapiens Intl (SPNS)…+20.2%
  • Veracyte (VCYT)…+26.4%

If you missed last week's edition of Small-Cap Saturday, Big Bill’s bullish on 5G, Artificial Intelligence and Industrial Robotics.  He thinks Teradyne (TER), a medium-sized semiconductor equipment & testing company, is well positioned to benefit from strong growth in these cutting edge industries.

And here’s some great news…

“Big Bill” has his sights set on another exciting investment recommendation.

He filled me in on the details, but I promised him that I wouldn’t reveal it to anyone (not even my wife) until it’s published.  That said, he did allow me to share a few details about the coming recommendation in today’s column.

So be sure to keep an eye on your inbox for this weekend’s edition of Small-Cap Saturday.

What I can tell you is that the stock belongs to a narrow industry group that possesses strong traits of technical strength.

In fact, when we run this sector through the gamut of our proprietary technical indicators in Sector Prophets Pro, we find that it currently holds a “perfect scorecard”.

autos and parts

And the stock “Big Bill” is targeting not only resides in this strong sector, but it also happens to be outperforming the entire group in terms of long-term relative strength.

So that means you’ll be getting another “top shelf” investment idea handed to you on a silver platter.

“Big Bill” will fill you in on all the details over the weekend.

And as a bonus, I promised “Big Bill” that I would provide an actionable options recommendation for his Small-Cap Saturday readers for those who prefer to trade options and use leverage.

We’ll see you on Saturday!



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