The small cap index will keep shining: Technical analyst

The S&P small cap 600 index has already surged 11 percent this year, and it could be headed higher, according to one market technician.

Compared with the more popular Russell 2000 index, the S&P 600 "has more highly profitable companies in it, some higher quality companies and it's done better as well," said Ari Wald, Oppenheimer's head of technical analysis on Tuesday on CNBC's "Power Lunch."

The charts look pretty favorable for the S&P 600, Wald added. Looking at a chart of the S&P SmallCap 600 index compared to the advance-decline line, Wald points out that more stocks within the index are rising than falling.


"We expect the S&P 600 to break to new highs because internal breadth in the index is broadening," Wald wrote in a Tuesday email to CNBC.

Stacey Gilbert, head of derivative strategy at Susquehanna Financial Group, said Tuesday on "Power Lunch" that when it comes to the options market, sentiment around small-cap ETFs is overall "not contrarian, nor is it crowded here; it does seem to be fairly mixed with a bullish bias."

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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