Mark Hulbert argues against the conventional wisdom that small-cap outperformance relative to large-caps indicates a positive trend (the idea being that large caps will “have to perform particularly well just to catch up”). This according to his recent MarketWatch article.

After evaluating 20 years of relative performance data for both the S&P 500 and the Russell 2000 (small-cap index), Hulbert concludes that outperformance by the S&P 500 is a “bullish omen,” and that, “none of the correlations provided support for what conventional wisdom would have you believe.” Some of the most significant correlations, he points out, emerge when looking at the three-month period:

“Needless to say,” Hulbert concludes, “these results don’t guarantee that the market will rise over the next three months. Large-cap relative strength is just one of the many indicators that claim statistical significance, and not all of them are bullish right now.”