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Small Caps Lead Stock Market; Homebuilder Poised For Run

Small caps headed Tuesday toward their fifth day in a row of outperformance, as gains in the major indexes lagged the small cap S&P 600.

X The Nasdaq added 0.1%, and the S&P 500 and Dow Jones industrial average echoed the move. The S&P 600 popped 0.3%.

Volume in the stock market today faded from Monday's brisk pace.

In the past four sessions, small caps have either shown smaller losses or bigger gains than the major indexes. Monday's action was especially impressive. The S&P 600 rose 0.3%, while the Nasdaq and S&P 500 dropped 0.9% and 0.2%, respectively.

Small-cap homebuilder LGI Homes (LGIH) rose 0.9% midday Tuesday after rising 0.6% Monday. The stock is forming a second-stage base, according to MarketSmith's weekly chart. The stock could be adding a handle with a 46.99 buy point, but until it develops the buy point is 50.05.

Blue chips were mostly up, with advancing issues outnumbering declining issues by a 3-2 ratio in the Dow Jones industrial average. Apple (AAPL) led the Dow with a 1.1% gain. McDonald's (MCD) lagged with a 1.1% drop.

Among IBD's 197 industry groups, food and dairy rose 3%, while the cement group fell 1%.

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