Today we look at large cap vs. small cap stock via the S&P 500/Russell 2000 Ratio. Since 1999, the ratio has gone nowhere other than down; which means this is the 8th year of decline. More generally, the ratio runs in 7 year cycles, so given we are in the 8th year, perhaps the time to consider readjusting ones portfolio is a wise decision. In fact, we believe the winds of change are forthcoming; it may not be today's business or next weeks, but we cannot ignore the developing bullish falling wedge. This, coupled with the oversold 20-week stochastic suggest a trend change; with confirmation coming with a breakout above both trendline and 100-week moving average resistance.
Therefore, the risk/reward dynamic of being long the ratio is rather good bet; certainly this should be on everyone's trading radar going forward.
