Don't Miss this Small Cap Breakthrough!

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It’s a big deal when you can quickly, efficiently, and routinely analyze market trends.

We’re now able to do just that with small cap stocks. In fact, in just a minute, I’m going to show you how you can do it today. The only thing we’re waiting on for full analysis capability is for liquidity to improve in the securities I’m going to discuss. But that’s a frequent challenge for those of us who call ourselves small cap investors, so let’s not be deterred.

Because pretty soon…

Small Cap Domination Will be Ours

But first, I want to let you know about a specific opportunity.

***Yesterday was a bit of a boring day in the market. The Russell 2000 finished the day 1 percent higher, but volume was not as strong as I would like to see. It seems the market has found a level at which it thinks stocks are fairly valued, for the time being.

I don’t think stocks are going to tread water at current levels for long however. Rather, I think the market will either rally hard from here, or take a sizeable step lower. When this is the case, active investors need to monitor trends, and get input from those following the market every day.

Jason Cimpl is that guy.

***I was talking to TradeMaster analyst and rock-star trader Jason Cimpl this morning and we both agree that technology stocks seem to be forming a solid base. This group of stocks rallied yesterday, as evidenced by the Nasdaq’s solid 1 percent gain. We’re hoping for some follow through, and that could bode well for small cap investors with holdings in this space.

Over the last few days, Jason and his TradeMaster readers have closed a couple positions with quick 13 percent and 7 percent gains. His latest 100 plus percent gain came in April. He’s on the prowl for the next big one, but in the meantime he is content to rack up consistently smaller gains.

SonicWALL (Nasdaq: SNWL) has been one of his favorite trading stocks lately. It’s a small cap tech stock in the internet software industry. His readers made 15% on the stock in early May (they were up more but got stopped out on the day of the “flash crash”). They got back in on May 25 at $8.79.

SonicWALL just hit $11.30 after a blowout earnings report. TradeMaster Daily Stock Alerts members made nearly 30% in 7 trading sessions!

Congratulations, Jason. You are making your readers very happy.

Jason has been consistently leading his readers to profits all year. And his service, TradeMaster Daily Stock Alerts, has the lowest cancellation rates I’ve ever seen. His readers simply don’t leave. If you’d like to discover what’s making hundreds of investors so happy, click here.

***Jason’s service is a great compliment to Small Cap Investor PRO, my small cap newsletter advisory service. This service has a longer holding horizon than just a few days, but when used with TradeMaster Daily Stock Alerts, subscribers are in a great position to capitalize on major profit opportunities.

***Now I’m going to let you in on one of the methods I’m now using in Small Cap Investor PRO to find these profit opportunities.

A month or so ago I unveiled what I believe to be a major step forward for small cap analysts – sector ETFs.  I’ve often found it incredibly frustrating that there is not a way to segment small-cap indices like S&P SmallCap 600 Index. Sure we can buy the iShares S&P SmallCap 600 Index ETF (NYSE: IJR) which tracks this index, but we couldn’t get any more granular than that. But all that recently changed. 

Thankfully, PowerShares recently came out with its lineup of Small Cap Sector ETFs. This is a huge deal, and I recommend you pay attention to these funds.

What is really cool is that we can now use the PowerShares ETFs as a proxy for small cap performance vs. large cap performance in all nine sectors covered by the S&P, and S&P Small Cap 600.

Chart the returns of the respective funds in each sector, and evaluate their relative performance. The results? You will see what sectors are performing best, and which asset class is outperforming.

Then take these results a step further and dig into individuals stocks in the sector.

***I recently put together the following table which shows returns for these 18 funds since the market started getting volatile on April 30^th. The results are pretty interesting, and show (no surprise) that all sectors of both large and small cap asset classes have lost ground lately. You can see the relative performance fairly easily.

But what’s really interesting to me is that all but three of the small cap ETFs outperformed large cap ETFs in the same sector during the sell-off.

This is pretty compelling evidence that small-cap stocks should be a part of your portfolio.

***Now these small cap funds are still new, so it will take some time for liquidity to pick up and for them to be a truly accurate proxy for sector performance. And you’ll definitely want to do some research to see exactly what the allocation in each particular fund is.

But one trend is clear - we can now save a ton of time looking for outperforming sectors in the small cap universe.

And that means more productive time spent looking for world dominating small cap stocks. Or getting outdoors to enjoy a beautiful weekend!

On that note, I’ll see you next week. If you’re interested, take a few minutes over the weekend to sign up for a risk free trial subscription to Small Cap Investor PRO by clicking here. My next portfolio addition is just about ready, and I think you’re going to like it.

***And finally, my Special Video Investment Conference, Profiting from Crisis in Europe airs tonight at 6:00 p.m. If you're looking from profit opportunities from the European debt crisis, this is the event you've been waiting for. There are still a few seats available, and you can sign up here for this free event.

Have a great weekend.