Small caps still in the game

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.

Small Cap STocks: Technical analysis chart of the IWM iShares Russell 2000 index ETF and evaluation of a potentially profitable trade

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.

Small Cap Stocks: Technical analysis of the potential for a proftiable trade in the XCS Canadian small cap ETF

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.


  • As you may know from previous comments, my prowess at market timing is not good so I tend to take a longer view. StockCharts shows that XCS.TO has returned only 16.35% over the past five years and has spent most of that time under water.
    Best to leave this one to the successful market timers like you.

    Welcome back from your very successful trip to Florida.

    • thanks Fred–yes we have been in and out of this one before quite profitably

  • Hi Keith,

    Please let me interject and point out the suspense on WTI. It’s probably griding just enough towards 50.00 to make you question if you should give a few more days to ZJO. Even more interesting, natural gas is above its 200 dma and some natural gas stocks will have broken their short-term downtrends by the end of the week. Even if you’ve talked about energy lately, I’d love to hear your thoughts on any of ZEO/XEG/ZJO, or, UNG/ZJN. I wasn’t excited in those last two until we got those last two days moves in CR.TO, BIR.TO, KEL.TO, PEY.TO. Are natural gas stocks the place to be, rather than oil stocks?



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