Banks, Small Caps Outperform. What Happened?

Early pressure in IWM/SPY quickly disappeared mid-morning yesterday and IWM vs SPY climbed easily above its .618 retracement resistance continuing with its out-performance; over 7% gain relative to SP500 since holding the key support mid-August. The August lows in IWM vs SPY and IWM vs DIA were at very pivotal technical levels. Relative to the SP 500 the Russell 2000 Index had been hugely under-performing all year and IWM/SPY retraced to the long term .618 Fibonacci retracement which was also where the pair was at the November US election. This correlated with the .786 (potential reversal) retracement in IWM vs DIA adding to upside potential in small caps if these levels held. Which they did.

Banks have also outperformed the broader index after KBE/SPY held its .618 retracement support the first week in September. KBE is up over 14.5% since its Sept 7th low and likely to continue with higher rates and the yield curve starts to steepen. Needs a clean break above the .786 retrace of the year.

The long bond future is negative below the 100dma with further momentum likely on a break of the short term pivot