Risk Appetite Is Hitting Across All 3 Market Caps 🚀

Today's number is... 3

Three cyclical vs defensive ratios are breaking out together across large, mid, and small caps.

Here’s the chart:

Let's break down what the chart shows:

• The chart displays three separate black line charts comparing custom cyclical sectors to custom defensive sectors across the S&P 500, S&P 400, and S&P 600.
  • Cyclicals include auto, consumer durables, media and entertainment, banks, diversified financials, capital goods, transportation, energy, materials, and semiconductors.
  • Defensives include health care equipment, pharma, food and staples retail, food beverage and tobacco, household and personal products, telecom, and utilities.

The Takeaway: Three parts of the market are now doing the same thing at the same time. Cyclicals are outperforming defensives across all three custom indexes.

All three ratios spent years moving sideways before this move. These consolidations are now resolving higher across the board, which is how strong bull trends begin.

The S&P 500, S&P 400, and S&P 600 ratios have all cleared prior resistance and pushed to new highs together. This is not a move being driven by one group.

Large caps are at all-time highs, mid caps are at all-time highs, and small caps are at 11-year highs. That is strength across the entire cap spectrum.

Small caps pushing to multi-year highs is the key tell. That is the highest-risk part of the market moving higher, which only happens when buyers are stepping further out the risk curve.

There is no divergence here. All three are trending higher and sitting at their highs at the same time. When everything is moving together like this, the risk appetite signal just gets stronger.

This is broad participation and expansion across the cap spectrum, which is what you see in strong bull markets.

Breakouts are fresh, and the path of least resistance is higher.

Let me know! 

Grant Hawkridge | Chief Aussie Operator, All Star Charts

The 2-to-100 scanner runs every week through small-cap names off fresh 52-week highs - before they show up in broader coverage. Rick Sarraf cuts it to one pick. Entry, target, done. $199 for the year.