Over the last 24 hours, two technicians that I respect very much have come out pointing to the current vulnerability in small-caps. I first brought up some potential resistance two Fridays ago on July 19th. As far as I was concerned, it wasn’t so much the momentum or any breaks in price, but more so the targets that were being achieved. The measured move and key fibonacci extensions were both right here. And as expected, price has stalled. But, to their credit, they haven’t given back any gains either.
Carter Worth of Oppenheimer is pointing to the resistance from the upper trendline connecting peaks throughout recent history. This takes us right to where we are currently in the Russell2000. Every time we’ve reached these levels, prices in small-caps have seen major corrections. Here are the monthly bars in $RUT going back to the 90s:
And then this morning, my pal Jonathan Krinsky over at Miller Tabak wrote about the waning momentum in the Russell2000. He sees a combination of a negative crossover on MACD and a daily RSI that has now turned back below 70:
He mentions that none of the support levels of consequence have been breached, but that given this loss of upside momentum, a close below 1035 opens up the door for a retracement down to the breakout level near 1000.
Again, from a pure price perspective, things are still fine. This is a big week of economic data so who knows where we’re sitting on Friday afternoon. But I think it’s important to note that these two guys, whose work I respect very much, are pointing to some red flags in small-caps.
Tags: $IWM $RUT $TF_F