Good day all... We've got all of the major indexes up on the day today but what I think is more interesting to note here is that over the last few days the DOW and S&P have both been outperforming the NASDAQ. If it wasn't such a low volume non-event type couple of weeks we're in, this might actually mean something. Reason being, ever since early '09 when the markets found their base and decided to rally, the NASDAQ led the charge the whole way. At least as far as the major indexes go. This is something we're going to keep a very close eye on because I really do find it hard to believe that the DOW and the S&P will lead the next leg up if we're going to get one. Too soon to tell but if this trend continues into January, we may have a shifting of the tide. For now, we're not going to make much of it though. What I am going to make something of today is something you may not have ever realized. If you already know, then hats off to you. You are probably in the 20% bracket of investors who make 80% of the money. Lead, Follow or Get Out of the Way Tech has proven over and over again since '09 that if you're going to invest Jimmy's college fund into large cap stocks with at least a decent risk/reward ratio, tech was the place to be. Buying Jimmy some gold coins sure wouldn't have hurt either though. However, over the last ten years and over the last three years in particular, small and micro caps have outperformed all of the major indexes. Guess that's why we have the SmallCap Network, eh? It was a great time to plug our site, sorry. Back to the point... I think it's just as important for you to also know that when the markets really decide to stage a fierce bull rally that small caps are usually the first sign of the bullish trend forming. I've included two charts today here. The first, a monthly chart of the Russell 2000 (in green) and the NASDAQ 100 (in red). This chart goes all the way back to '03. I think my point is pretty evident here. The Russell leaves the NASDAQ behind when the markets decide to rip. Conversely, the NASDAQ seems to be the one that wants to lead when things go south. The second chart I've provided here is a daily chart of both indexes again. All year, the Russell hasn't wanted to lead. What has that meant for the markets in general? A whole lot of nada. However, all of a sudden as recently as late November the Russell has been taking charge. Is this the sign of a new big leg up for the major U.S. markets? Very well could be. A month doesn't make a long-term trend but this is starting to look pretty appetizing once again. Russell Who? I'm sure at some point in history, some wizard fundamental investor with the last name Russell propelled his way into the market limelight with an unparalleled return percentage and the Russell basket of indexes was born. Actually, I just made that up. I have no idea how the Russell indexes were named Russell. If you find out, let me know. What we do know is back In 1984, a team from Russell used insights about investment management behavior to launch the Russell Indexes. These new tools were designed to produce indexes that objectively track performance and better reflect investment manager behavior. Over the last 20 years, Russell has been a leading innovator in index design and has continually set industry standards. The most popular of the Russell indexes is without question the Russell 2000. The median market cap for the Russell 2000 is roughly companies with a market cap of a half billion. Russell puts their emphasis on tracking investment management behavior and their track record, although not stellar, has definitely managed to outperform their large cap brethren. They, like us, believe the biggest returns in the market are more than likely going to come from small and micro-cap investing ideas. A novel idea many investors just don't seem to understand. Is it smart to put all your eggs in a small or micro-cap basket? No, but I believe every single person's portfolio should consist of a speculative part of the portfolio that does allocate to small and micro-caps. If you don't, you're more than likely just going to experience returns similar to those who simply buy major index ETF's. Snooooooze. The Russell also now has a micro-cap index which consists of companies in market cap size of just over $100M. This is where I believe the investing sweet spot is if you're willing to handle the volatility and risk associated with micro-caps. When you catch the right one, it's a very rewarding feeling both monetarily and emotionally. If you want to take a closer look at the Russell basket of indexes that focus on small and micro-cap issues, here's some direct links to identify who, why and how they come up with their list of index members. This is the fact sheet for the Russell 2000 and this is the list of all of the companies in that index. If you want to drill down and see what their micro-cap index has to offer, check out the fact sheet for the Micro-Cap Index and their member list of companies for it. Now don't get me wrong, there's some real dogs and some real winners sitting in those indexes so it's definitely not the end all be all for investing in the small or micro-cap space. As a matter of fact, if you can identify companies before they are included in those indexes, that's where the best value may be and we here at SmallCap Network are always on the lookout to bring you early stage companies with the potential to become huge winners someday. That's it for today and as a matter of fact, that's going to be it until Tuesday of next week! All of us here at the SmallCap Network want to wish you and your families a safe and happy Holiday Season and an amazing New Year!