Risk On: Small-Cap ETFs Leading the Way So Far in August

Bulls like what they see in small-cap ETFs that are outperforming the S&P 500 so far this month after lagging in July.

The small-cap iShares Russell 2000 (NYSEArca: IWM) is nudging ahead of SPDR S&P 500 (NYSEArca: SPY) so far in August. [Small-Cap ETFs Underperforming in July]

The leadership of small-cap ETFs suggests investors are growing more comfortable taking on risk as fear over the European debt crisis recedes somewhat.  [Volatility ETFs: It’s Quiet Out There…Too Quiet]

Year to date, however, the small-cap IWM is trailing SPY with a gain of 9.3% versus 12.9% for the S&P 500 fund, according to Morningstar.

“The Russell 2000 has turned around on a relative basis this month. The relative ratio chart shows a reversal from just above support from October last year. Outperformance from this higher beta area is indicative of a bullish market place,” said Investors Intelligence technical analyst Tarquin Coe.

“The price chart is finding support at its 200-day exponential moving average. A test of the 2012 high from March … is expected,” he wrote in a newsletter Wednesday.

Russell 2000

Full disclosure: Tom Lydon’s clients own SPY and IWM.

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