Russell 2000 Forecast: Is There Enough Fuel For The Rally?
Small caps made a powerful comeback, but the easy money may now be running out. After holding a critical support level and gaining momentum from the ceasefire optimism, the Russell 2000 is now in the zone where convictions are going to be challenged. The breakout is real, but optimism must turn into reality for prices to continue rising.
Two weeks ago, I described the Russell 2000 as having hit a line in the sand, and I laid out levels to watch should the bounce happen. I wrote that bulls had to put up or we were surely going lower. At the time, the small-cap breakout was hanging by a thread. The U.S.-Iran War had eroded market breadth, a death cross had printed on the iShares Russell 2000 ETF (IWM) chart, and the four-year base breakout was staring down a hard retest at ~245. My read was that bulls had to reclaim ~252 with conviction, or this becomes a failed breakout. IWM is now trading at ~262. The retest held. The bulls showed up in force. What looked like a technical trap has resolved, but now we have hit the levels where I said I would take profits. Let’s update the game plan for what may come next for the Russell 2000.