Chart of the Day – Thursday, July 18, 2024

$IWM $IWB

Will the 200d MAV of the RATIO Russell 2000 to Russell 1000 be the kiss of death again? pic.twitter.com/0CIWsB6mP0

— conradseric, CMT, CAIA, CEFA (@conradseric) July 18, 2024

Today’s Chart of the Day was shared by Eric Conrads (@conradseric).

• Small Caps finally cooled off today after trouncing Large Caps over the past week. The Russell 2000 ($IWM) had outperformed the Russell 1000 ($IWB) by nearly +10% over the prior five days, marking the sharpest five-day rally since the inception of these ETFs.

• Despite this historic outperformance from Small Caps, the long-term trend still favors Large Caps. This ratio is hovering near multi-decade lows in a well-defined downtrend. 

• Eric points out that it’s testing its 200-day moving average from below. It has failed at this downward-sloping moving average several times since 2021.

The Takeaway: Despite a historic counter-trend move over the past week, the long-term trend still favors Large Caps over Small Caps. Large will be in charge until this ratio starts printing higher highs and higher lows (aka trending higher).