Bulk of the action in the market since July was dominated by large caps and mid caps. The small caps had a minor role to play. After a few months of consolidation, a hint of a rally is developing in small caps. In last couple of weeks the large caps have mostly been consolidating or pulling back.The AMEX index is quitely moving up now for few weeks.
Monday was the first day I started finding lots of small caps in scans and yesterday also there were more than 156 stocks up more than 5% on higher volume. The small caps are very good trading vehicles in my scheme of things. Even a small catalyst can propel a small cap stock 25% plus in a quarter. Inefficiencies are more evident in small caps and low float stocks than in large caps.
While two days action might be just a fluke, there are other interesting things showing up in my indicators. The Stock up 50% or more is at 9 by end of yesterday. Levels above 10 indicate a good momentum on individual stocks. Now this indicator is climbing back after making a low last week, which again shows momentum accelerating rather than decelerating. Inference more sectors , stocks breaking out to upside. Similarly my other indicators like number of stocks making 25% move in 65 days and number of stocks up 100% in a year have started climbing back after hitting bottom last week. So tentatively indicating a broadening of rally.
When a market gets stuck in a range, there is lot of churning. Stocks which have gone up go in to correction. While most of the attention gets focused on those stocks, new set of stocks and sectors start their upward march, most of the time the overall weakness in index can mask this. Over a period of time I have developed an overall market monitoring mechanism to try and capture some of these moves earlier. I will have more about it later today......