The small cap Russell 2000 was an outperformer with a 1.2 percent gain, but it remains 12.5 percent below its highs.
"[Monday], small caps outperformed in a down tape so maybe the trend is going to be our friend here," said Steven DeSanctis, director of small cap research at Bank of America Merrill Lynch.
Small caps may have bottomed, he said. "You're basically getting double digit earnings growth with a double digit decline in price," he said.
Last year, the opposite occurred with the index up 38 percent and earnings growth of just 10 percent. "Valuations ballooned to 19.5 (price-to-earnings ratio), and now you're down to 16.2," he said. The Russell has been viewed as a sort of canary in a coal mine, with traders speculating its weakness would spread ahead of the sell-off in major indices.
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"People are really worried about the slowing of China, Japan and Europe. What does that mean for earnings? Ultimately, the bottom line for fundamentals for companies have been really, really solid," he said. "For me, the next week or week after is when we start to sift through the earnings. We're going to get a better feel for how things are going here."
DeSanctis said the small cap universe is not as affected by oil prices as large caps, but market volatility harms small caps. The small cap energy stocks were 24 percent higher for the year but have turned 40 percent lower with the drop in oil and gas prices. One positive is that consumers should benefit from lower prices.
Earnings for small caps should also be less affected by slowing global growth as just 18 percent of revenues are from outside the U.S., but he said the small companies do have large cap, multinational customers so they could be hurt indirectly.
"It comes down to what you think about the overall U.S. economy…The U.S. economy is tracking around 3 percent for the third and fourth quarter. Small cap earnings (growth) should be somewhere in the teens, and the estimate is about 8 percent," he said.
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DeSanctis said the small caps were heavily impacted by the seasonal volatility of September and October this year.
Bespoke Investment Group, meanwhile, points out that just about 16 percent of the S&P 500 stocks are above their 50-day moving average, and when that level has fallen below 20 percent is a bullish indicator in the past, it's shown to be statistically positive for stocks. In 93 percent of the times, the market was higher a year later with an average gain of nearly 17 percent.
Bespoke said it views the indicator as a positive for the market and says while the correction could continue for a few more days, the medium and long-term outlook for stocks is positive.
Keon said a lot of events converged to bring down the market, such as the Ebola scare. "Complacency is one reason it was so sharp and unexpected. Waking investors from their stupor once in a while is a good thing. We're still in a bull market and I think we're going to head higher before the year is out," he said.