Can Small Caps Seize This Opportunity?

The large-cap side of the market rebounded from a slow start on Wednesday, while small caps continued to move higher. That makes five consecutive green closes for the iShares Russell 2000 ETF IWM. We saw the same thing in July with the huge rally and a more condensed five-day move in February. Neither managed to hold the move for over a month, but maybe the third time is the charm.

IWM is clear of resistance now, save the intraday spike back in July. Bulls should have a strong $10 support channel ranging from $215 to $225. The fourth quarter is setting up with an outperformance opportunity. I’ll watch small caps closely to see if they can seize the chance. As they sit now, they appear to offer an attractive reward versus risk setup.

Speaking of outperformance, Meta Platforms META is up 63% year-to-date, despite several large corrections along the way. The stock broke below its 10-day exponential moving average (EMA) on Wednesday as well as its trendline support. If we see $570 fail to hold, I wouldn’t consider buying the stock until we bounce off of $550 or spend a few weeks trading between $580 and $600.

That being said, there is a flaw in my wants versus what the market will likely provide. Meta reports earnings on October 30. Let the “trick-or-treat” earnings puns begin.

Don’t look now, but the SPDR Gold Shares GLD are again breaking out to the upside. The current setup is similar to the early September breakout, with gold trading sideways for several weeks before pushing higher.

Keep an eye on that rising trendline that began in early August. It coincides with the 21-day EMA, which has served as a support level along with the 10-day EMA on the recent rally.

Gold looked a little troublesome to start the month, but buyers stepped in at support, giving longs a clear stop level to use as they ride GLD higher.

At the time of publication, Byrne had no positions in any securities mentioned.