Big Small-Cap View. Final rally reward becoming less important than post April/May risk ahead of mid-term elections. Wave counting can be a lonely business with non-practitioners looking at it like they would a fortune teller. But like a fortune teller who adroitly deciphers real-world clues from their audience, rather than from “the beyond”, to intone appropriate fortunes, wave counting frames the push-pull between smart and speculative money to reveal where we are in the investment cycle. On its basic level, wave counting starts with a bear to bull reversal driven by smart money, followed by a short-lived pull back. A more convincing, stronger move then follows powered by increasing institutional participation, whose initial upward probes were confirmed. A second pull-back ensues later as early winners start to take profits. Then a third and final upward move commences, culminating in full-on, public participation that eventually fades as holdings are transferred from the smart to weaker hands. Ultimately this attenuation leads to a notable correction as weak hands first lose enthusiasm, then hope and then their money. In that cycle, large- and small-caps normally move more or less in synch, albeit often at different magnitudes. But every once in a while, those phases are out of step. It appears we are in one of those rare times, where the S&P 500 chart looks exhausted, etching what appears to be a rounding top with failed wave counts, while the R2000 continues to favor one final bull-ward leg. To do so, the R2000 needs to rally without violating 2582 (on a daily close) in order to sustain our wave count push to 3000 by Apr/May. And while we still think the path to 3000 remains more likely, the large-cap heaviness may weigh on the rest of the market, sparking an earlier mid-term retreat than the typical April/May high. The R2000 violating 2582 would warrant greater caution and the assumption that it is better to prepare for the mid-term downturn rather than try to squeeze the last bit of upside in small-caps final leg.