Technical Analysis

The Russell 2000 is outpacing the other indices today

Risk on flows into the small-cap stocks as traders reevaluate Fed policy

The Russell 2000 index of small-cap stocks is outpacing the other indices in trading today. The NASDAQ index is up 0.15%. The broader big cap S&P index is down -0.29%. The Dow industrial average is the worst performer at -0.45%.

In contrast, the Russell 2000 index is up 1.25% as the flow of funds head into the more volatile small-cap stocks as traders reevaluate Fed policy. With the weaker than expected jobs report and 7 to 8 million jobs still left to be filled to get to pre-pandemic levels, the taper ideas have been pushed further toward the end of the year.  Tightening ideas are even further into the future.  

That story can change if inflation continues to run higher, but for now it’s more of a Goldilocks feeling.

Technically looking at the hourly chart, the recent dips in the Russell 2000 index have found support buyers near its 200 hour moving average. The low today stalled right near that moving average before surging to the upside. Last week there was a dip that took the price below the moving average, but only for a single hourly bar before buyers entered in push the price back higher. It will take a move below that MA (green line currently at 2272.74 and moving higher) to hurt the bullish bias. The 100 hour MA is at 2287.80 (and moving higher). 

On the topside, the swing high from April 29 comes in at 2326.07. That is the next upside target. Get above that level and traders will be looking toward the April 2021 high of 2368.312. That is the all-time high for the small-cap index.  
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