Thursday, January 25, 2007

Whither the Small Cap?

I drew this picture on my high-tech Etch A Sketch* otherwise known as "Excel"** with a little help from Power Point.

This is the IWM, the ETF version of the small cap index - the RUT 2000 or more familiarly the Rusty 2K. Anyway rather than give you the loaded with distractions charts as I usually do when talking prices I thought I'd produce a stripped down version to show you where we were (and where we've been for awhile) in the small cap world.

Sometime in the next forever there is going to be a breakout - but which way? Ah but there's the rub - how can we tell from the price action when we are range bound? Unfortunately there is only one way - if we go above the upper dotted line we are probably going up - if we drop below the lower - well you know the rest of that story. For now - repeat after me - there is no trend in small cap. Which might explain your mutual fund performance lately.

*Etch A Sketch is a toy invented in 1959 by Frenchman Arthur Granjean and introduced commercially by the Ohio Art Company (ticker: OART) in 1960 - it enjoys popularity even today. I just looked at OART and I don't know why, maybe they discovered a cure for cancer in left over etch a sketch aluminum powder and plastic beads, but it went from 5 bucks a share in Nov 2006 to close at 9.50 yesterday. I kid you not. (Damn! I love Wikipedia! If I had had Wikipedia back when I was in school --- wow!)

**You all know where Excel comes from, Power Point too.

1 comment:


Smallcap stocks can have great potential.