The tight range in small caps continues.
After a record jump in Q4 last year, it looks like they have simply been consolidating those historic gains all year.
Perfectly normal and likely will breakout higher eventually. Could history rhyme with another big Q4? I think so. pic.twitter.com/T0R588Jvyr
— Ryan Detrick, CMT (@RyanDetrick) September 27, 2021
Today’s Chart of the Day was shared by Ryan Detrick (@RyanDetrick). It’s a weekly candlestick of the Russell 2000 ETF, $IWM, over the past three years. Small-Caps kicked off the week on a strong note today, with the Russell 2000 outperforming the Nasdaq by the widest margin in six months. As you can see, the Russell 2000 has been stuck in a well-defined range for the majority of this year. Prior to this consolidation phase, it had been sprinting higher for nearly a year. So, this pause could be viewed as healthy in the grand scheme of things. If price does eventually break out, it has the potential to make another meaningful leg higher given that it has built a six-month base to launch from. You know what they say about big bases….the bigger the base, the higher in space! As Ryan notes, Small-Caps could be setting up for an impressive end-of-year rally, similar to what we saw after the US election last year. But before we get ahead of ourselves, the Russell 2000 needs to break out of this range first. It certainly doesn’t hurt that seasonality becomes a tailwind in a couple of weeks.