IWM: Time to Think Small - 80% hit rate on this seasonal play
I am publishing a seasonal opportunity for a ~2 month trade with several small caps. A of the details are listed together on my substack.
open.substack.c...-to-think-small?r=2iufr4&a...
IWM
has shown a strong rebound from the October lows, breaking out of a descending wedge on November 3rd, retesting on November 9th, and consistently moving upward since. It is currently testing the volume weighted average price anchored to the 2021 high. This is likely to offer some resistance before we see a move higher.
This trend sets the stage for a reliable seasonal pattern where small caps typically outperform larger companies. The most predictable period of outperformance occurs from mid-December to mid-February, ending higher in 24 out of 30 instances (80%) with an average return of 11.9% and a median return of 5.6%. Annually, this translates to an average return exceeding 70% and a median return over 30%.
Examining the past 30 years, we observe the Russell 2000:
I'm expecting to see IWM come back to 175-178 area before making a move higher.
open.substack.c...-to-think-small?r=2iufr4&a...
IWM
has shown a strong rebound from the October lows, breaking out of a descending wedge on November 3rd, retesting on November 9th, and consistently moving upward since. It is currently testing the volume weighted average price anchored to the 2021 high. This is likely to offer some resistance before we see a move higher. This trend sets the stage for a reliable seasonal pattern where small caps typically outperform larger companies. The most predictable period of outperformance occurs from mid-December to mid-February, ending higher in 24 out of 30 instances (80%) with an average return of 11.9% and a median return of 5.6%. Annually, this translates to an average return exceeding 70% and a median return over 30%.
Examining the past 30 years, we observe the Russell 2000:
- Consistently outperforming the Russell 1000 in terms of both average and median returns in nearly all years.
- Outperforming the S&P 500 on average in all years and higher average increases in all years, but showing median underperformance in the past decade.
- Generally underperforming the Nasdaq across the time series.
I'm expecting to see IWM come back to 175-178 area before making a move higher.