It is, and when done well, it sounds really good.
To be harmonically correct, you wouldn't use a capo except for the IV and V of the key. That is, you could do it with a cappo at the 4th or 5th frets and the same chord shapes.
Here's why:
If you build triads on every note of the major scale, you get new chords made up of the same notes.
For the II, the chords are minor, as they are for the III and the VI. For the IV and V, the chords are major, which is why a cappo works there. You're still in be playing major chords for the harmony.
So for E major, as in the example,
You could play the following chords in perfect harmony.
E
F#minor
G#minor
Amajor
Bmajor
C#minor
D#dim
Someday we'll win this thing...
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