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.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.