This week's strong chart action in the Nasdaq market and small caps has lent more support to large cap stock indexes that have been setting new record highs. Chart 1 shows Powershares QQQ Trust breaking out to a new recovery high this week. Its relative strength ratio (above chart) has also been rising. Relative weakness in the Nasdaq between February and April had been one of the drags on the rest of the market. The same is true of small caps. Chart 2 shows Russell 2000 iShares (IWM) climbing to a two-month high and ending well above its 50-day moving average. Small caps actually did better than large caps during the week. That's reflected in its relative strength ratio (top of Chart 2) which bounced this week. The RUT/SPX ratio has been stabilizing over the last month after falling sharply from March to May.
