Small Stocks Play Catch-up.And That's A Positive, Says Dr. Joe Duarte
Duarte added: The small stocks, after a slow start, look to have caught the buying fever along with the big stocks, a sign of improvement for the markets, which increases the potential longevity of the rally.
Small cap stocks are a fountain of growth for investors, which mean that you want to see them participate in any rally in a significant way. If they fail to move higher with the blue chips, it creates what technicians call a breadth divergence, a situation that should be of concern to investors.
Until February 12, the S&P 500 had outperformed the small stocks, a fact that suggested that money that was moving into the market was going into the S&P 500, a sign that the rally was likely from short covering as well as short term traders looking for quick profits.
Small stocks, at least at this stage of the cycle tend to offer value, which is the province of mutual funds and investors with a long-term time horizon. That's why Thursday action was a nice thing to see.
Duarte's conclusion: The broader the rally, the better chance that it has to move higher. For now, unless something very drastic happens, it looks as if the bulls might have gotten a reprieve.
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Duarte partners with the Investors Resource Center at Investrend Information (http://www.investrendinformation.com).
Duarte's IntelligentForecasts.com (http://www.intelligentforecasts.com) provides free news coverage and analysis, and his daily articles and news summaries offer recommendations and analysis for ETFs, and individual stocks in the technology, health and biotechnology, and energy sectors. Duarte has combined expertise in health care, energy, and the effects of politics and global intelligence on the financial markets offer a unique blend of insight and information to thousands of active investors and political and intelligence aficionados around the world on a daily basis.
He is the author of: Futures And Options For Dummies, Successful Energy Sector Investing, Successful Biotech Investing and co-author of After-Hours Trading Made Easy. In early 2001, in Successful Energy Sector Investing, he correctly predicted that Venezuela's political problems could lead to an energy crisis in the United States. He has also appeared as a weekly guest on Market Mavens Radio and has logged appearances on KNX radio in Los Angeles, Financial Sense.com radio, and Wall Street Radio.
One of CNBC's original Market Mavens, Dr. Duarte has been writing about the financial markets since 1990. His articles and commentary have been featured on CBS Marketwatch, Barron's, Smart Money, Medical Economics, and in Technical Analysis of Stocks and Commodities magazines. In 2003, Doctor Duarte received second place, in the professional section, of the Medical Economics Investment Challenge with a 12-month return of 42%.
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