Thursday's Market Minute: Small-Caps Stall; RUT Out Of Step Again

The Russell 2000 often feels like the black sheep of the major equity indices, and it once again was the odd man out yesterday. The other three major equity indices made new all-time highs, while RUT saw a failed upside breakout from a symmetrical triangle pattern that began in early March. The small-cap index boasts the highest year-to-date percentage gain of its peers, up more than 15% as of yesterday’s close, which typically would be viewed as a sign of risk-on sentiment.

However, the index also shows some interesting dispersion from its cohorts. It failed to move above even its previous highs near 2280 from early April yesterday. Additionally, the conventional relationship between RUT and the other three indices (SPX, NDX & $DJI) has been breaking down for weeks. Looking at a 30-day correlation during the past year, the Russell often is strongly in sync with the others with correlations commonly ranging between 0.8 and 1; it’s now in the 0.2 range for each other index, suggesting weak/no relationship.

As the trading week winds down, watch for support first near the lower boundary of the symmetrical triangle near 2200. Beyond that, look near the 2070 to 2100 range for whether buyers will step in on derivative products as they have during the previous three drops, as this area also contains the 63-day Exponential Moving Average near 2180 and the lower Linear Regression 50% Channel line around 2170.

Photo by Adeolu Eletu on Unsplash