The stock market seems to be delivering a message to us right now regarding the kind of stocks we should be buying. That message is: Go big, or go home – in market capitalization, that is.
Above is the chart of the S&P 500. Its making new highs – a bullish omen for the markets going forward. Same goes with the NASDAQ. New highs all the way, baby! Things seem to be looking good. Or are they?
Looking at the bigger picture, we can see on the broad-based NYSE composite (which represents and index comprised of all stocks on the NYSE) that new highs are not being made. So what gives? Lets dig a little deeper.
The S&P 400 mid-capped stock index (MDY is the ETF that follows this index, below) is flat. It sits roughly at its old high level in or around $260.
The Russell 2000 (IWM is the ETF for this index) isn’t even challenging its old highs. In fact, after hitting just under $120 twice (March & June of this year), it is struggling to test its last peak (a lower peak than the aforementioned two peaks) of around $117.
Clearly, the further down the market capitalization size we go, the less performance we are seeing. Perhaps until the small and mid-capped stock indices take out their old highs, we should focus on the clear leaders of current markets: the larger capped stocks.
Click here to see my BNN MarketCall appearance from last Friday. Lots of discussion about enery stocks. I enjoyed doing this one:
Below is the Globe & Mail article with my new “Top Picks”