Let’s take a closer look at what’s happening. In the chart below, we look at the performance ratio of mid-cap stocks to large-cap stocks, using the S&P Mid Cap ETF (NYSEARCA:MDY) and the S&P 500 (NYSEARCA:SPY).
As you can see, it’s been trading in a longer-term channel and hit upside resistance in late 2016 / early 2017 at (1). And it has been heading lower ever since.
The decline is currently testing 8-year support (2) with momentum levels oversold and potentially creating a higher low. Mid-caps have rallied from these momentum levels in the past (see green markers).