Are Small Caps About to Outshine Big Tech in a Massive Comeback Rally?

The gap between small caps (IWM) and big tech (QQQ) performance has been jaw-dropping.

But are small caps gearing up for a rally?

As the tech trade has become more crowded, IWM Call volume spiked.

Take a look☟

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Small Caps (IWM) vs Big Tech (QQQ): Astonishing Underperformance

As regional banking struggled, this made the Russell unapproachable for many.

Leading to significant rotations back to mega-cap tech and away from cyclical.

Further spurred on by the ongoing AI optimism and robust earnings.

Which now appears overcrowded.

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IWM Call Options Spike: Relief Rally on the Horizon?

Interestingly, a recent surge in IWM call options activity suggests traders may anticipate a relief rally.

Which would likely come following a debt ceiling deal of sorts.

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CTA Positioning: Poised for Short Squeeze?

CTA positioning has turned extremely short due to the ongoing downtrend.

A short squeeze might be brewing, but better news from banks and Washington is needed to break the deadlock.

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Implied Vols: IWM Resilience Since March

Understandably, implied vols in IWM have outperformed other major US indices since March.

Meaning, it’s a perfect time to keep a close eye on small caps and mega-techs as these market dynamics continue to unfold.

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➠ Get more color on this in the attached clip from today’s Macro Options Spotlight ↴

➠ Want to know what our Volatility Dashboard for RTY is telling us?

➠ Watch today’s full Spotlight video below ↴

Market Whiplash! | US Rallies, China Stumbles, & Commodity Chaos | Macro Options Spotlight | May 18, 2023

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➠ Still curious about the details of our IWM trade idea?

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And we often leave out the juiciest details, like trade ideas.

But, right now, you can get ALL of our research for completely free by using the code RV2023 at checkout.

➠ Just you the link below, select your product of choice, navigate to check out, and enter RV2023 ↴

Then you’ll be all set for an entire month of free macro research and trade ideas sent directly to your inbox.

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Thank you for making it this far.

Please share this with any investors and traders in your life looking for where a relief rally is most likely to play out.

Cheers!

Imran Lakha
Options Insight

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