Small Caps May Have Catch-Up PotentialThe Russell 2000 remains well below its record highs from 2021 – unlike other big benchmarks. But some traders may think the small-cap index can play catch-up.
The first pattern on today’s chart is the falling trendline along the peaks of May and June. RUT broke it in mid-July and retested it a few weeks later. Has old resistance become new support?
Second, prices are back above their 50-day simple moving average. The 8-day exponential moving average (EMA) is also above the 21-day EMA. Those patterns may reflect bullish trends in the intermediate and short terms.
Third, MACD has turned positive.
Fourth, RUT bottomed in August at its low from June. The S&P 500 and Nasdaq-100, in contrast, hit levels from May. That may also suggest that relative strength is improving.
Finally you have the long-term comparison with the Nasdaq-100. The RUT/NDX ratio bounced after hitting a record low in early July. It’s now near a 50 percent retracement of that surge. Holding such a location could indicate a change of direction.
Given strength in the broader market and optimism about monetary policy, some investors may think broader conditions favor a recovery in small caps in the later months of 2024.
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