The S&P 500 was within a couple of points of 1,700 this week, nearly a 9% advance off of the June 24 low. Based on the 10-day moving average, the market is modestly overbought in the short-term. Over the past several trading sessions, stocks appear to be consolidating. The Delta Market Sentiment Indicator is bullish and we are buyers on pull-backs.
We believe high relative strength stocks generally outperform the broader market over time. On July 19, 2012, the PowerShares DWA SmallCap Technical Leaders Portfolio ETF (DWAS) was launched. It is a portfolio of about 200 high relative strength small-cap stocks. It is benchmarked against the Russell 2000 (IWM). For the year ending July 23, DWAS was up 45.7% — roughly $24 to $35 per share. The IWM was up 37.2%. An investor should expect higher volatility from small capitalization stocks than large-caps but potentially higher returns.