Fund.TBD
Swing Trader, Technical/Fundamental Analysis
Small caps have the best chart of the three major US indexes, and money is flowing into the financials and biotech names the Russell 2000 is full of. The position was started on the post-FOMC flush and will be managed against the 9-day EMA, with the risk of exiting if Fed chair Warsh's press conference goes the wrong way. x.comÂ
US small caps look vulnerable because the rally is a tech-focused mania they don't participate in. The S&P 500 holds enough tech to join in, but small caps do not, and rising 10-year yields hurt that index far more than multinational tech. Every secondary indicator has now turned negative, so the key is whether the Russell 2000 gets rejected from a new high over the next week or two. x.comÂ
Falling rates and buying in financials, consumer discretionary and Home Depot make US small caps a very good buy here with high probability. The drawdown exceeds 11%, as it did at the start of the Iran war, and daily RSI and MACD are at similar bottoms. x.comÂ
Betting against US small caps means fighting trend, valuations and smart money, all of which favor the bulls. x.comÂ
A suspected crash and liquidity squeeze make small-cap longs unattractive initially. x.comÂ
US small caps are drawing a rotation that signals the market is quietly going more risk-on. When the Nasdaq and S&P 500 printed their first red daily candles after 14 straight green days, the Russell 2000 still closed higher, showing money moving from large caps into small caps rather than leaving the market. x.comÂ
US small caps are finally breaking out of their long pullback as the market recognizes that yields have likely topped, with inflation and Fed worries easing. x.comÂ
US small caps look exhausted on the weekly chart, with a rising wedge, a spinning top and bearish RSI divergence; a break below 291 would target 285, 278 and 270. A Fed stuck at 3.75% keeps refinancing costs high for unprofitable Russell 2000 names, 43 names left the index at reconstitution, and banks are a bigger slice as the yield curve nears a 12-month tight. A move above 300 would invalidate the view. x.comÂ
A seasonal bottom ahead of maximum seasonal bullishness favors US small caps now. Stock Traders Almanac says the Russell 2000 is down 11% from its August 14 high and expects small caps to bottom in mid-to-late October before rallying into year-end. x.comÂ
US small caps are now one of the strongest indexes, trending up almost steadily since April's low with shallower pullbacks than the Nasdaq, and the rotation into small-cap value is not over. The trend stays bullish while the index holds its 21-day EMA and the 296 gap, with gamma-structure targets at 305 and then 310-315. x.comÂ
High interest rates are hurting US small caps. The Russell 2000 is retesting its May lows even while the Dow is up and the S&P 500 is only slightly lower. x.comÂ
US small caps look as bullish as they possibly could after an insanely clean breakout and retest of a five-year accumulation range, a setup that can run for years, not months. As the highest-risk equity index, the Russell 2000 is a barometer for high-risk assets broadly, and US liquidity is breaking out from its lows at the same time. This is not a bear market; everything should go a lot higher this year. x.comÂ
