Small-cap exchange traded funds were outperforming the S&P 500 in Friday’s rally after Federal Reserve Chairman Ben Bernanke’s speech, but that hasn’t been the case in recent weeks, which has some technical analysts worried.

“The iShares Russell 2000 (NYSEArca: IWM) is in the midst of a tightening triangular range. Today’s wild intraday swing is a typical coiling range trait,” said Tarquin Coe at Investors Intelligence in a newsletter Friday.

Triangle patterns often suggest indecision in markets and a consolidation before the next big move. [Stock ETFs Waver]

The small-cap iShares Russell was up 2.4% in afternoon trading Friday, while the SPDR S&P 500 ETF (NYSEArca: SPY) gained 1.5%. [Stock, Gold ETFs Rally After Bernanke]

Year to date through Aug. 25, the small-cap ETF was down 13.3% while the S&P 500 was off 6.6%, according to investment researcher Morningstar. Small-caps tend to lead the way when investors are bullish on the U.S. economy.

“On a relative basis the [small-cap] fund has underperformed the S&P 500 since mid-July. That underperformance continues and is expected to do so until a short-term bottom is achieved,” Coe wrote. “Where could that occur? Based on the depth of the triangle, a move down to around $60 [a share]is implied, the area of last summer’s lows.”

iShares Russell 2000

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.