Live Markets: Small-cap tech vs large-cap tech: Little guys grab spotlight

Power Integrations

20/11/2020 14:10

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    SMALL-CAP TECH VS LARGE-CAP TECH: LITTLE GUYS GRAB SPOTLIGHT
(0900 EST/1400 GMT)
    As small caps have stepped out of the shadows  urn:newsml:reuters.com:*:nL1N2HX191,
large-cap tech shares have suddenly found their little brothers
aren't so easy to push around anymore. (Click on chart below)
    Indeed, since peaking in late 2016, the Invesco S&P
Small-Cap Tech ETF  PSCT.O  / Technology Select Sector SPDR Fund
 XLK.P  ratio has been in a multi-year downtrend.
    This as a large-cap tech/FAANG mania took hold, which has
Apple  AAPL.O  and Microsoft  MSFT.O  now accounting for nearly
12% of the S&P 500's  .SPX  total market cap, and nearly half of
the XLK's exposure.
    That said, the trend of small-cap underperformance put in a
low on September 1. With this, the PSCT - XLK spread had
collapsed from $22.46 in late 2016, to minus $34.60 on Sept. 1.
    Since then, however, there has been a dramatic change. Both
the ratio and the spread have advanced. In fact, both have
reclaimed their 200-day moving averages (DMAs). This as the PSCT
has rallied nearly 16% and the XLK has declined about 4%.
    If the ratio and spread can continue to rise toward the
resistance lines from their late-2016, and late-2017, highs, it
would suggest a much greater period of small-cap outperformance,
and potential for the spread to flirt with positive territory.
    Falling back below the 200-DMAs can suggest stalled rises.
 urn:newsml:reuters.com:*:nL1N2I51XN
    Among top holdings in the PSCT are Brooks Automation
 BRKS.O , Power integrations  POWI.O  and LivePerson  LPSN.O .
    
 
 
    (Terence Gabriel)
    *****
      
    
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 (Terence Gabriel is a Reuters market analyst. The views
expressed are his own)