Last week, we pointed to the outperformance of large caps over small caps. But interestingly, we've seen both Micro Caps $IWC and Small Cap Growth $IWO transition from red to green on the ETF Power Rankings this week.
On further inspection, there's a fascinating setup that could be developing.
Small Cap Growth $IWO is failing to hold its breakdown relative to Large Cap Growth $IWF. When this line is moving lower (as it has been for a while), it means small cap growth is underperforming large cap growth.
But if this breakdown fails, it would indicate this line could quickly shoot higher.
In other words - small cap growth could be on the verge of an explosive move higher.
The smallest growth stock tend to be very speculative; companies that have not fully proven that they can follow through on their promises, businesses that have long duration on cash flows to pay back their investors, and a lot of operational and market risk.
It's for this reason that they're also highly volatile.
If they can follow through, investors get very rich.
If they do not, they get crushed.
So what would it suggest if these companies are on the verge of exploding higher?
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