Small caps have taken a breather on both sides of the border. It’s easier to analyse US small caps due to the widely followed Russell 2000 index, and the very widely traded IWM ETF shares. On the other hand, the Canadian small capped index is not widely followed and the iShares XCS ETF is pretty thinly traded. Nonetheless, we can view both charts here and ascertain what we can from them. I’m focusing on the weekly charts for mid-termed analysis.
Starting with the IWM (US small caps) units—we can see that the US small caps are firmly in an uptrend—having taken out the old resistance of around $122. Momentum has rounded over, but moneyflow momentum (top pane) and more importantly cumulative moneyflow (bottom pane) are in great shape. The middle pane pits IWM against the S&P500 larger capped index. Its trending down in the near-term , but still outperforming – see my trendline—in the mid-termed picture. Seasonality is generally strong for the index until early May. My take is that we can expect a bit more chop—witness the momentum indicators still pointing down. But it’s likely that we will see the index, and this ETF, move higher by May. This bodes well for investors looking in the smaller capped stock space—with an eye on the individual sector for the stocks within this broader index.
Next, let’s look at the Canadian small capped XCS fund. Moneyflow is less important here, because the ETF is not widely held or well traded. However, trend counts on this chart—and it is largely in an uptrend. I must note here that the uptrend line and current support in the mid-$16 range is being tested, and must hold for the trend to remain in place. Its holding above the 200 day MA but just barely. Momentum is pretty oversold, but hasn’t hooked up yet. It could very well hook up shortly and signal an “all clear” for a bounce on the trendline. Comparative strength to the TSX 300 is flat. Seasonality is unknown for this index or the TSX small caps.
Between the two, the IWM is the better looking chart. Wait for it to prove its trend is still ok and there may be a month or more left in the trade.