IWM/SPX spread - Long smallcaps
Been watching for a reversal of the trend between the 2 indexes and a breakout of this bullish falling wedge for a while.
Fundamentally it made sense to look for this breakout result because of the looming interest rate cuts and frothy bond yields since the start of the year. Small caps are highly sensitive to such things.
Long IWM or TNA is the play on this breakout. But the best value will be found in heavily beaten down individual small caps.
If you want to hedge against a market correction long small caps short large would be the other play.
Fundamentally it made sense to look for this breakout result because of the looming interest rate cuts and frothy bond yields since the start of the year. Small caps are highly sensitive to such things.
Long IWM or TNA is the play on this breakout. But the best value will be found in heavily beaten down individual small caps.
If you want to hedge against a market correction long small caps short large would be the other play.
Note
IWM vs SPX still going strong. I see a lot of bears misunderstanding the magnitude of reversing this decade long underperformance from the smalls. Sure there are a lot of crappy stocks in IWM but money will take the path of least resistance if the setup is there. Don't fight the chartNote
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Came back to test the wedge breakoutNote
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One hell of a whipsaw on the breakout line with the Monday dip but this wedge is still very much in play. Can't count small caps out yet.Note
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Coming back to try the breakout again after Powell's super dovish comments from Jackson Hole.
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