Small Cap benchmark index Russell 2000 (RUT) has careened back-and-forth through a 13% range throughout 2014 – up until last week when it plunged below year-to-date support and has yet to come up for air.
In apparent contrast, larger capitalization indices such as the S&P 500 (SPX) and Dow Jones Industrial Average (DJIA) have spent 2014 decoupling from RUT’s laggard performance. Now the Russell 2000 has shaved off -10% YTD and is down -14% from it’s all-time highs in early July and large cap stocks have begun to take notice, with the S&P down almost -4.5% over the last 5 trading days alone.
Has the contagion of volatility and pessimism holding RUT in its grips for almost a year finally spilled over into the broader market? Are segments of the market that have proven resilient unit now about to follow the small caps sell off much lower?
This extensive review of the Russell 2000’s technical health examines the index from a variety of angles, finding confirmation the index is leading the market lower and provides balanced projections on just how deep the RUT’s correction may go.
For more insights on small cap stocks and the Russell 2000 check out Andrew’s September 23rd post looking at many of these themes, along with great coverage by the broader See It Market team here.
Twitter: @andrewunknown
Andrew holds net short exposure to Russell 2000 at the time of publication. Commentary provided in the above text and video is for educational purposes only and in no way constitutes trading or investment advice. “Abandon All Hope” image via madmargaret.wordpress.com. Quotation excerpted from Canto I of “The Inferno” of Dante’s The Divine Comedy.
