Chart of the Day - Tuesday, June 6, 2023

The rotation into small caps (i.e., expanding breadth) is generating a breakout in $IWM above its 200-day MA, giving it good room to resistance; note the DeMARK "13" from @DeMarkAnalytics supports near-term outperformance vs $SPX #fairleadstrategies pic.twitter.com/SPoSJGRIaG

— Katie Stockton, CMT (@StocktonKatie) June 6, 2023

Today’s Chart of the Day was shared by Katie Stockton (@StocktonKatie). The lack of participation from Small Caps has caused concerns over breadth in recent months. However, Katie points out that the Russell 2000 has improved significantly over the past week, on an absolute and relative basis. It closed at its highest level in nearly three months today, and it's back above its 200-day moving average. The next major resistance level is the August highs, which are around $200. On a relative basis, it outperformed the S&P 500 by the widest margin in more than a year on Friday, and again today. Further rotation into Small Caps would be very constructive, as it would represent breadth expansion.