Chart of the Day - Wednesday, November 4th, 2020

Today’s Chart of the Day was shared on Twitter by Arthur Hill (@ArthurHill). It's a daily bar chart of the Russell 2000 ETF, $IWM, over the past six months. Yesterday, we highlighted the potential for a post-election surge in Small-Caps. We clearly didn't see that today, as the Russell 2000 underperformed the S&P 500 by the second widest margin in the past decade. But as we know, one day does not make a trend. Arthur points out that there are a number of reasons to favor Small-Caps here. For starters, $IWM formed a bullish island reversal pattern over the past week. Secondly, it was the only one of the four major indices to have broken above its September highs last month. In general, Small-Caps are risker than their Large-Cap peers. For this reason, they serve as a good barometer of risk appetite for the broader market. The idea is, if there's demand for the smaller/risker stocks, then we're likely in a market environment where stocks, as an entire asset class, look attractive.