Russell (RTY) Small Cap Index up 12% in 3 days

October 6, 2011

This is a potential sign for a change in sentiment. If investors start to react to the real economic data again, which has been much better than what has been feared, small caps stand to benefit the most from valuation re-rating as many less liquid stocks have been demolished as of three days ago. Short squeezes are more likely in this area as well – the ax swings both ways with less liquidity.

The next segment to focus on is EM which has also been crushed. Both EM and small cap rallying would be strong confirmation of the rally. Watch the H-Shares overnight.

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