Small-Cap Slowdown Just a ‘Pause,’ Analyst Says

Monday, 27 Feb 2012 | 6:09 PM ET

The slowing of small-cap stocks over the past week is no cause for concern, one analyst said Monday.

Carter Worth, chief market technician at Oppenheimer Asset Management, looked at the Russell 2000 ETF , which has outperformed the S&P 500 off the lows with 40 percent of growth before stalling.

Small Cap Losses Signal Concern?
Small caps have underperformed relative to large caps over the past week or so, does that mean investors should be worried? Carter Worth, of Oppenheimer, explains.

“It’s perfectly normal to stop and pause, and I would just interpret it as that rather than maybe the foreshadowing of something worse in terms of small-cap underperformance,” he said on “Fast Money.”

Worth called it a “benign” occurrence in the Russell, as well as most indices.

“We’ve reached 39 consecutive days where the S&P has not gone down 1 percent,” he said. “That hasn’t happened since ’07.”

Have Financials Bottomed?

Price charts for financial stocks show a familiar pattern.

Looking at Bank of America, an established downtrend emerges with pricing bumping up against the line.

“When you finally do break above it, it typically represents the beginning of the end,” Worth said. “So by all of accounts, this is the early stages of a longer-term bearish to bullish reversal.”

Goldman Sachs showed a similar pattern, Worth said.

“All financials look this way,” he said. “The premise is the financials have bottomed.”

Are Homebuilders a Buy or Sell?

Worth also looked at XHB, the homebuilders ETF.

“As an intermediate player, it’s right to be selling XHB,” he said.

Echoing optimism in the housing sector, Worth also noted that charts show strength confirming the bottoming trend, making it a long-term play.

“A stock can be a buy and a sell at the exact same time,” he said.

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Trader disclosure: On Feb. 27, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Nathan is long (AAPL) Puts; Nathan is long (BAC) Puts; Nathan is long (DELL) Puts; Nathan is long (LNKD) Puts; Nathan is long (PCLN) Calls & Puts; Nathan is long (XLK) Puts; Nathan is long (VIX) Calls; Finerman is long (JPM); Finerman is long (AAPL); Finerman is short (SPY); Finerman is short (IWM); Finerman is short (MDY); Adami is long ( C); Adami is long (GS); Adami is long (INTC); Adami is long (AGU); Adami is long (NUE); Adami is long (BTU); Adami is long (MSFT)

For Anthony Scaramucci
Scaramucci is long (BAC); Scaramucci is long ( C); Scaramucci is long (GS); Scaramucci is long (MS); Scaramucci is long (YHOO); Scaramucci is long (IBM); Scaramucci is long (CS)

For Scott Nations
Nations is long (MSFT)

Nations is long ( C)

Nations is long (JPM)

Nations is long (GNK)

For Scott Kessler
Raymond James & Associates makes a NASDAQ market in shares of PCLN.

For Carter Worth
Oppenheimer analyst who covers (GS) has long position

For Rebecca Patterson
No disclosures

For Jamie Cox
Firm owns (JPM)

Cox owns (JPM)

Cox owns (BAC)

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