The Russell 2000 at 20 and 200

• Posted by Greg Harmon
• on August 26th, 2016

The Russell 2000 has been the laggard in the stock market in some sense. It is up over 30% since its low in February, whereas the S&P 500 and Nasdaq are only up a bit over 20%. It is not the performance. It is that the Russell 2000 is still over 4.5% away from making a new high. The S&P did it in early July and the Nasdaq at the end of July. The Russell 2000 is still looking up at its June 2015 high at 1296.

Is it time for the Russell to catch up? There has been a lot of talk about rotation lately. Sector rotation, index rotation, asset rotation. All of it is supposed to be healthy and keep that wall of worry going. And it may be showing that the Russell 2000 is about to be the beneficiary of rotation.

The Russell 2000 ETF ($IWM) above shows the picture. The ETF ran higher off of the February low until it broke its 200 day SMA in April. That began a stall and consolidation that held it near the 200 day SMA for 5 weeks. When the 50 day SMA finally crossed above the 200 day, a Golden Cross, in late May it started higher again. It pulled back in an Inverse head and Shoulders, retesting the May low, and then moved higher.

Since crossing the 20 day SMA July 7th, it triggered the Head and Shoulders and has been in a steady trend higher. That 20 day SMA has now acted as support as the Index ETF rises. Over the 200 day SMA and seeing the 20 day SMA act as support. Should this continue, look for a new all-time high to come soon.

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