“Strong bull markets tend to be characterized by leadership and outperformance in small-cap stocks as money grows more confident about the future and positions for higher risk with higher return potential,” writes Pension Partners chief investment strategist Michael Gayed at MarketWatch. [Small-Cap ETFs Win Big]
Still, some technical analysts warn that the Russell 2000 needs a sustained breakout for the overall market to follow.
Currently, the Russell 2000 and the other major indices are “in an eerily similar setup that shows the same price divergences” as in 2007 before the market crashed on the subprime crisis, writes Jason Cimpl at Wyatt Investment Research. “Keep a watchful eye on the Russell 2000 this month.”
iShares Russell 2000
Full disclosure: Tom Lydon’s clients own IWM.