A secular rotation into large-cap stocks is well underway, according to Ari Wald, Technical Analyst at Oppenheimer.
Following 15 years of Russell 2000 outperformance, Wald says the Russell’s long-term relative uptrend versus the S&P has broken and is rolling over (see Chart 1). As such, he recommends selling the Russell on strength and buying the S&P on weakness.
In the nearer term, given extreme pessimistic sentiment conditions and improving seasonals, Wald expects a Q4 rally to take the S&P 500 up to its 200-day moving average around the 2060 level.
See Chart 1.