The highest scoring names in small cap from 1 year ago (5/2/2013) returned 347 bps more than the Russell 2000. The best performers have been CIR up 71%, MRTN up 69%, SAM up 68%, HOMB up 62%, and ODFL up 61%.

• The best small cap sectors are utilities and industrial goods
• The top industry is trucking.

The average score across our small cap universe is 44.67, below the 4 week moving average score of 46.75.  The average small cap is trading -26.28% below its 52 week high, -3.69% below its 200 dma, and has 6.77 days to cover held short.
 
The best scoring small cap sectors are utilities, industrial goods, consumer goods, and basic materials. Services stocks score in line, but consumer discretionary stocks face tough seasonal headwinds. Technology, healthcare, and financials score below average -- trade up in market cap where possible.

 The following chart shows historical small cap scores since 2010.

Over the next three months, equity markets tend to underperform bonds. The IWM has finished July higher than it starts May just 4 out of the past 10 times, returning a median -2.05%.  Meanwhile, TIPs (TIP) have gained in 8 of the past 10 years during the period.

The best scoring small cap industry is trucking (SAIA, MRTN). Railroads (GBX) also score highly as traffic volume supports railcar orders. Business services (EXAM, KONG) offer upside. Independent oil & gas (KWK, GDP) benefit from seasonal strength in natural gas prices and rising production rates. Auto parts (MTOR, SMP) demand offers opportunity as European production headwinds shift to tailwinds.EU commercial and passenger vehicle registrations rose 11.1% and 10.6% year-over-year, respectively.

In small cap basic materials, buy independent oil & gas and drillers (WTI). The best consumer goods baskets are auto parts and processed & packaged goods (DMND, BDBD). In financials, focus on P&C insurers (UFCS) and investment brokers (CLMS). P&C insurers tend to offer upside through hurricane season. In healthcare, medical appliances (GB, ARTC, BABY, CNMD) and specialized health (HWAY) score best. The top industrial goods groups are heavy construction (AEGN) and aerospace/defense (ORB, AVAV). Aerospace/defense stocks tend to outperform ahead of the summer air show season. In services, buy truckers, rails, and business services. In technology, concentrate on semi ICs (DIOD), diversified electronics (SIMO), and printed circuit boards (SANM).

The following compares average monthly returns for R2K (IWM) and the S&P 500 (IWM). Small cap tends to outperform through June.

The following table breaks out the best seasonal small cap performers over the past decade for the three month period ending July 31st.