Can Small Caps Break Out?

09/29/2010 9:47 am EST

Focus: STOCKS

Thomas Aspray

, Professional Trader & Analyst

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In early September, the S&P 600 (small cap index) and S&P 400 (mid cap index) were diverging as the S&P 400 was showing better relative strength (RS). The RS line on the S&P 400 has just broken out to the upside. The index has also surpassed the June-to-July highs while the S&P 600 has not yet moved above its summer resistance. For the S&P 600, the downtrend in the RS has just been broken, suggesting that it may be ready to start outperforming the S&P 500. Both indices are above their 200-day moving averages.

Tom Aspray, professional trader and analyst, serves as video content editor for MoneyShow.com. The views expressed here are his own.