Small Cap & NASDAQ Technical Leaders Update

At the end of March we began tracking two new indexes based on our Technical Leaders methodology.  The two new indexes follow Small Capitalization stocks and stocks traded on the NASDAQ exchange.  We use our Technical Leaders methodology for three other indexes: Domestic Equities, Developed Markets Foreign Equities, and Emerging Markets Equities.  These three indexes are licensed by PowerShares and you can purchase ETF’s based on the (tickers: PDP, PIZ, and PIE respectively).

These two new indexes aren’t licensed by an ETF provider so you can’t directly invest in them.  We like the concept for both indexes because history shows that relative strength works very well with small cap stocks.  The NASDAQ Technical Leaders is also very intriguing because there are many companies in that universe with very dynamic business models, and those are the type of companies that relative strength is very good at identifying and capitalizing on.

The constituents for both indexes are below:

Small Cap:

NASDAQ:

The performance for the second quarter was so-so.  Both indexes had a huge first quarter (as did most RS strategies) so they remain well ahead of their benchmarks for the year.

If you have any questions about the indexes please post them in the comments section.

4 Responses to Small Cap & NASDAQ Technical Leaders Update

  1. inthewoods says:

    I’m hoping you guys can get these into ETFs – they’d be great. Only issue I have with your ETFs is just liquidity – only PDP meets my liquidity requirements, but I know this is not something you can obviously control!

  2. John Lewis says:

    We are hoping someone will pick them up too.

    What are your liquidity requirements? I haven’t heard of anyone having problems trading either PIZ or PIE in size. The underlying securities in each of those ETF’s are very liquid. If you are looking to do a large trade you can go right to an AP and get the shares created so the actual trading volume of the ETF doesn’t really matter (what matters is the underlying liquidity of the securities in the ETF).

  3. inthewoods says:

    My requirement is that an ETF trade at least 50k of shares per day – so it’s not about trading in size, I just don’t like buying ETFs that trade, say, 2-3k per day because I have no idea what the liquidity would look like under stress.

  4. inthewoods says:

    Actually – I take it all back – I’ve been misreading the volume on my charting software – and now realize that they met the liquidity requirements. Shows what happens when you switch data providers! My fault! Looks like they’re on my radar now.

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