Mister Crypto
Bitcoin & Altcoin Trader, Investor
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 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
US small caps stand to gain most as a liquidity regime shift begins. Long-dated Treasuries look to be printing a final bottom, and if yields reverse lower from below 4.8%, better liquidity expectations would support risk assets on cooling inflation, continued earnings and eventual Fed cuts. With SpaceX, new Fed leadership and midterms ahead, yields look set to fall, letting speculative assets catch up in a Goldilocks phase or end-cycle melt-up. Weakening earnings would make it a late-cycle trap. … Show more
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
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 are set for a long run of outperformance, since their 10-year return gap versus large caps has turned negative only in technology booms, each followed by big small-cap runs. After the space-race trough they reached an 18% annualized lead by 1983; after the dotcom trough they led by 8-9% into the mid-2000s. They were cheaper than now only at the dotcom peak. Though up about 20% in 2026, they sit near the widest gap in decades. The call fails only if AI keeps all money in ten names. … Show more
Small caps leading like this only happens when liquidity is everywhere, the equity version of shitcoins pumping near a top. The Russell 2000 is back at new all-time highs and running ahead of the S&P 500. 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
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
Growth stocks should keep outperforming small caps because rising rates now hurt small caps far more. Large-cap and AI-linked growth companies are cash-rich and lightly financed, while about a third of Russell 2000 debt is floating-rate versus roughly 6% for the S&P 500. As hike expectations returned, small caps' lead over the S&P 500 shrank from about 11 points in June to about 2, and IWM tracks long bonds far more than QQQ. The ARKK/IWM ratio has reclaimed its rising 20-month Bollinger basis. … Show more
Improving breadth and GPUs massively outrunning depreciation costs put US-equity risk/reward heavily in bulls' favour. Some 59% of S&P 500 stocks are above their 50-day average; the Nasdaq 100 is positive over five trading days, and small caps bounced off their 200-day average. Buy gradually, as the selloff may not be completely over. x.comÂ
