Chart of the Day - Monday, December 21st, 2020

Today’s Chart of the Day was shared on Twitter by Ian McMillan (@the_chart_life). It's a ratio chart of the Nasdaq 100 futures vs. the Russell 2000 futures over the past year and a half. As we know, the Nasdaq is heavily weighted towards Large and Mega-cap stocks, while the Russell 2000 is the benchmark for Small-Cap stocks. So, this effectively another way to visualize the rotation between Small and Large-Cap stocks. The Nasdaq has underperformed the Russell 2000 since September. However, Ian points out that we could see the Nasdaq reassert its leadership in the near-term. In a comment to The Chart Report, Ian said "The relationship between these two indices has reached the same low point we saw in June, and has approached this area with a bullish divergence in momentum. If we were going to see Large and Mega-Cap stocks, particularly the FAAMG names, outperform in Q1 2021, there’s a good shot that accumulation could begin this week. The great part about this is the risk/reward opportunity: If the Nasdaq doesn’t turn higher here, and Small Caps continue to lead, we will know very quickly."