Charting the Market: Russell 2000 Makes Historic Move
Small-cap stocks spread out the breadth, which improves market condition, but where do we stand now after two days of selling?
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Where have you been all year, small-cap stocks? For the first half of 2023 the Russell 2000 index had mostly been asleep. With much of the rest of the market rallying sharply higher the small-caps barely had any return when the second half got underway. In fact, the iShares Russell 2000 ETF IWM was sitting at nil, a zero return while the Nasdaq and S&P 500 boasted nearly a 20% gain. That is some separation that frankly does not exist too often.
But once news came about lower inflation, specifically the CPI reading that was lower on July 11, it was no holds barred. Small-cap stocks, which do well when interest rates start falling, had a watershed moment, rallying about 6.5% in about two sessions. The move higher continued this past week, but with some intense selling on Thursday and Friday even the IWM gave up some ground.
So, where do we stand now? Last week's big reversal candle will need to be watched closely. If stocks rise up and move ahead of last week's lows, there is a solid chance the IWM will get to the old highs around $230, and then some higher price targets can be discussed. Moving Average Convergence Divergence (MACD) is now on a buy signal, and the chop indicator (pane 3) says a trend is developing.
