Russell 2000: Nobody Puts Baby in the Corner

Maybe I should not admit it but my favorite movie is not Wall Street or Trading Places. It is Dirty Dancing. It was an instant classic with rebel Johnny Castle (Patrick Swayze) training and then falling for Frances “Baby” Houseman (Jennifer Grey). A coming of age movie. Baby is misunderstood by her parents (of course), written off as a failure. Then in a classic scene at the end of the movie Johnny gives the line, “nobody puts Baby in the corner,” before whisking her off onto the dance floor for a dramatic performance.

The Russell 200 was a lot like this. It had been written off as a laggard as the S&P 500 and Nasdaq 100 were making new highs. It had moved in a slow grinding channel for 10 months and then had broken the channel to the downside. But then the Russell 2000 found its Johnny Castle. It moved higher off of that break down and then two weeks ago the Russell 2000 found itself breaking to new highs.

But Wednesday may have been the Russell 2000’s shining moment, when it was whisked out of the corner. With nearly a 2% move higher on the strongest volume in 10 months it put an exclamation point on its new all-time high. The successful leap off the stage Baby had been unable to do until then.

So what is next? Intermediate term momentum suggests that this move might just be getting started. The RSI has burst higher into the bullish zone gaining strength as the MACD is just now crossing higher. This does not mean it will be a straight shot higher, but there is a stronger breeze at its back. And the price action suggests a 3 Drives pattern would continue to near 164 in the Russell 2000 ETF, $IWM. Baby is out of the corner.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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