Small caps have room to run in their new bull market

TopdownCharts
07-07

In terms of upsides and bullish-rotations, one area making big moves is small caps.

After retesting its big breakout earlier this year small caps have had a strong run.

And as previously outlined, small caps are trading on cheap valuations vs history (with good relative value vs bonds and vs large caps too).

Thanks in part to passive index investing and the primacy of big tech, small caps have become a neglected part of the market e.g. ETF market share (implied allocations) and rolling net-fund-flows for small caps are ticking up off record lows.

That is a classic contrarian bullish signal.

On that basis, along with cheap valuations and bullish technicals, small caps likely have plenty of room to run from here (and offer a bright spot amongst the bearish banter).

$iShares Russell 2000 ETF(IWM)$

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