During the Aug. 22 Market on Close livestream, host John Rowland, CMT, made an important observation: while everyone’s watching mega-cap tech, small-caps just broke out. With the Russell 2000 ETF (IWM) up only 6% on the year, traders may want to consider which sectors could lead the stock market if profit-taking hits tech — particularly as the Fed edges toward rate cuts.
Breakout levels matter: John noted IWM has cleared his breakout zone and is now trading about 4 points above it, with an Average True Range (ATR) of ~4 points. That’s a clean signal of momentum building.
Rate sensitivity: Smaller companies are highly sensitive to borrowing costs. If the Fed delivers even a modest series of cuts (John mentioned up to 50-75 basis points by year-end), small-caps could benefit disproportionately.
Broadening market: Tech has carried the S&P 500 Index ($SPX) for months. A breakout in IWM suggests breadth may finally be improving.
Industrials: Lower financing costs can spur capex and infrastructure-related growth.
Financials: Rate cuts can revive lending and credit demand, especially for regional banks.
Homebuilders: If mortgage rates drift lower, demand could rebound.
John highlighted these sectors as other potential beneficiaries of a September policy shift.
Add ETFs like IWM, S&P Industrials (XLI), Financials (XLF), and Homebuilders (ITB) (XHB).
Save top ETF holdings as sector watchlists to track leading stocks.
Use the ETF Screener → filter by sector, performance, RSI, and volume.
For IWM stocks: use the Stock Screener to filter by RSI 40–60, 50-DMA > 200-DMA, and Avg. Volume > 1M.
Markets may be “getting ahead of themselves,” as John put it. But if the Fed cuts rates, leadership could rotate. Industrials, financials, homebuilders, and especially small-caps are all worth watching.
