By Scott Brown, CMT

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1/ Small caps soar to 10-month relative highs

The big story this week has been the surge in small-cap stocks. The Russell 2000 ETF is up more than 5% so far, versus the S&P 500’s 1.8% gain. That has sent the ratio of small vs. large to its highest level since early February. Periods of outperformance for small caps over the past four years have been fleeting, but one reason to think this time is different? The absolute chart might finally be breaking out. IWM crossed $250 for the first time ever yesterday, and a breakout that sticks could suggest this bull market is just getting going.

2/ Semiconductors still in the driver’s seat

They’re volatile, they go down more than the market every time there is a negative trade war headline, and until proven otherwise, semiconductors are absolutely market leadership. SOXX, the iShares Semiconductor ETF, has been above its 200-day moving average vs. the S&P 500 since early June and is trading right at 52-week highs. In absolute terms, SOXX has just broken out from a 15-month base, and the last time we saw a similar breakout, it ran 40% over the next seven months.

3/ Sticking with China amid the headlines

Even more in the headlines are Chinese stocks. But we focus on trends, not the news, and the iShares MSCI China ETF (ticker: MCHI) has been above a rising 200-DMA vs. the S&P 500 for almost all of 2025. The absolute chart has already broken out of a multi-year base; I believe the relative chart is poised to follow.

4/ What’s not working? Real estate and consumer staples

Finally, it’s just as important to know what’s not working as what is, and two sectors that continue to trend poorly and make new relative lows are real estate and consumer staples.

In tomorrow’s newsletter, we’ll tie all these trades together and break down how Brown Technical Insights uses relative strength to build portfolios, generate alpha, and stay invested in a bull market.

Scott Brown, CMT is the founder and chief strategist at Brown Technical Insights, a research service providing essential insights into market trends, technicals, and opportunities. He has been a member of the CMT association since 2017 and received his charter in 2019. You can follow him on X and subscribe to his newsletter at www.BrownInsights.com.

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