Russel2000: A New Golden Age for the small-caps?
Yesterday's performance of the major US indices (S&P500, Nasdaq and DowJones) and Russel2000, and its impact on investment strategies showed a negative close for the Nasdaq and S&P500 indices, while the Russel2000 closed positive (+0.10%). This move indicates a shift in investor focus away from the technology and growth stocks that have dominated the market over the past year. The reassuring economic outlook and dovish signals from the Federal Reserve are leading investors to look for opportunities in smaller-cap companies, known as small-caps. This shift in preferences has put the Russell 2000 on the radar of investors, especially those looking to diversify their portfolios, after a period of heavy gluttony in the sectors that have become the most overweight: technology, financials, energy and industrials, heavily weighted around BigTech and GrowthStocks.
The monetary policy shift towards summer has made companies with lower average debt levels and less focus on the Artificial Intelligence cycle look better. Following last week's announcements, large financial and banking companies have already begun to gradually disinvest, marking what could be the beginning of a recessionary cycle or end of the economic cycle ceiling, looking for other types of more stable assets in what could be another advanced part of the economic cycle.
From a technical standpoint, the Russell 2000 index has shown an inverted cup formation on the one-hour chart throughout the quarter, within a bullish channel in a fairly sharp price range. This could indicate a possible regression to the price of the lower part of the channel or a strong return to the trading area of the checkpoint most marked by the price bell around 1986 points. However, we also note a triple top and a slight overbought level according to the RSI divergence at 63.54%, suggesting the possibility of a price correction.
In summary, while the news indicates a renewed interest in small-caps, technical indicators point to a possible correction in the short term. It is essential to closely follow the evolution of the index and be on the lookout for future news that could influence the market. Are we facing a new golden era for small-caps, like the one we saw between 2021 and 2022?
Ion Jauregui - AT Analyst
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The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
The monetary policy shift towards summer has made companies with lower average debt levels and less focus on the Artificial Intelligence cycle look better. Following last week's announcements, large financial and banking companies have already begun to gradually disinvest, marking what could be the beginning of a recessionary cycle or end of the economic cycle ceiling, looking for other types of more stable assets in what could be another advanced part of the economic cycle.
From a technical standpoint, the Russell 2000 index has shown an inverted cup formation on the one-hour chart throughout the quarter, within a bullish channel in a fairly sharp price range. This could indicate a possible regression to the price of the lower part of the channel or a strong return to the trading area of the checkpoint most marked by the price bell around 1986 points. However, we also note a triple top and a slight overbought level according to the RSI divergence at 63.54%, suggesting the possibility of a price correction.
In summary, while the news indicates a renewed interest in small-caps, technical indicators point to a possible correction in the short term. It is essential to closely follow the evolution of the index and be on the lookout for future news that could influence the market. Are we facing a new golden era for small-caps, like the one we saw between 2021 and 2022?
Ion Jauregui - AT Analyst
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.