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breaking news   The Russell 2000 takes a break this week.  New all-time highs for small caps


The price broke the March 16 high for the first time on Tuesday this week.

The Russell 2000 joined the stock market party this week by moving above the March 2021 high for the first time during trading on Thursday. That high stood at 233.78 and, although that level was tested in June on a few occasions, the index high could not be exceeded. The reason? Concern for higher yields.

Discounting future earnings at a higher rate, along with high multiples for some of the small-cap stocks, was not positive for that sector of the market. So the sellers leaned in and lowered the price (and walked away from the test ceiling).

However, as the last floor in August stalled just above a lower swing area between 206.40 and 210.03, buyers have shown up at key levels.

For instance:

  1. Buyers in early October bought against a lower trend line. Bullish
  2. The October 27 price stalled at the near-converging 50,100 and 200-day MAs. The minimum reached 222.81. The 200-day MA was 221.82. The 100-day MA was 222.80. Buyers relied on key MAs. Bullish.
  3. The price moved above oscillating highs between 232.80 and 233.78 and moved away from that old high on Wednesday. Bullish.

The index declined slightly yesterday, but since bouncing from the October 27 low against the MA group, the move from low to high took the index up to 8.88% in 8 business days. Nothing bad. Since August 19 (55 days), the index has risen 15.5%.

In addition to bullish technical clues, falling yields in recent weeks are also providing a tailwind for the index. The market is more comfortable with the idea that rates may go up in the second half of 2022, but that will still be fine. In the meantime, there is still a springboard for startups to create business in a post-pandemic economy and it appears that there is still enough money to fund the next generation (including the meta-universe).

What would hurt the bullish story?

  • Yields fall higher
  • Technically a move back under the old roof.

A move below the old swing levels implies a 4% decline from today’s high. Is that possible?
Sure. But when you have a breakout, and we saw a key breakout this week, the market will come along and bet the fundamental story remains intact.

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