Act II for Small Caps?The Russell 2000 small cap index made a cameo appearance in the bull camp during the summer. Now, some traders might think it’s back for an encore.
The first pattern on today’s chart is July 16’s last price at 2,264. RUT ended yesterday above it, representing the highest close in almost three years.
Second, a series of higher lows may reflect accumulation by institutional investors.
Third, the index is still about 7 percent below its all-time peak in late 2021. Does that provide space for a potential move higher, especially with other indexes at or near new highs?
Finally, there’s the idea of a rotation back to small caps after a long period of underperformance. The second chart with two-week candles shows the ratio of RUT against the Nasdaq-100. Notice how the ratio has held a 50 percent retracement of July’s surge. That may potentially suggest a new upward trend has begun.
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