Sykodelic
Crypto Analyst, Macro Specialist, Creator of Syko Therapy Newsletter
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 look seriously strong: the Russell 2000 has confirmed a deviation below its uptrend, and US liquidity is pushing hard off its lows. Liquidity always leads small caps, and small caps lead altcoins. This is not a bear market; the market has had a mid-cycle high, not its cycle high, and everything is going higher. 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 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
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
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
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
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
The Russell 2000's cheapest P/E among the major indices does not make small caps a buy. Once growth and earnings revisions are factored in, it looks like the least attractive index of the group. x.comÂ
Betting against US small caps means fighting trend, valuations and smart money, all of which favor the bulls. x.comÂ
