The small caps continue to outperform, even with yesterday’s volatility and this morning’s weakness. Until that changes, I am reticent to embrace the bear case as much as many traders seem to be on Twitter.
Observing the IWM ETF (for the Russell 2000 Index) daily chart below, you can see the upper Bollinger Band puncture two Tuesday’s ago. Since then, we have seen a fairly routine pullback to the “middle band,” which is the 20 period moving average on a given timeframe. Here, the 20-day moving average area is attempting to provide support. If the bulls are for real, then they should absolutely hold here and prove this is a mere restocking for the party rather than an inflection point.
Also note the Russell now has a rising 50-day moving average, implying the bulls have made some serious progress since the November lows.
I continue to key off the small caps, and have noted as much to 12631 and Weekly Strategy Session members for several weeks now. This is not a new epiphany at all.
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