Small Cap Glory:

In recent times we have seen small caps start to show some strength. The IWM rests 7% off most recent 52 week highs, but the index last Friday completed a bullish 3 week tight pattern, with the weeks ending 10/9-23 all CLOSING within just .72 of each other. If we drill down more into small caps in the healthcare arena, the PSCH has been acting well. The chart below shows good action POST breakout above a double bottom breakout pivot of 132.42 taken out on 10/5 jumping 3%, and we know the best breakouts tend to work right away. The ETF sits just 3% off most recent 52 week highs, while the XBI and PPH trade 4 and 11% off their most respective yearly peaks. Trading the fund itself would involve a lot of slippage due to low daily trading volumes, but some holdings in the fund look attractive. Top holding NEO is filling in a gap right near a prior breakout above a cup base trigger of 41.13. MMSI has completed a handle on its cup base just below the very round 50 number, and it reports earnings Wednesday.

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