After getting absolutely wrecked in 2022, small caps spent about a month, starting January 6th, roaring to life. Some of them threw off triple-digit percentage gains. Over the past week, however, they seem to have lost their mojo, as illustrated by the /RTY futures. I’ve circled the lower highs that have taken place since last Thursday.
If we take a vastly longer-term view, by way of the daily chart of the IWM ETF, we can see that the small cap market has been range-bound for a full ten months. It’s pretty clear we’re still quite high in this range, giving the bears an advantage.
It seems to me, going back to the /RTY futures, that the 1916 level is key. This constitutes the neckline for the bullish breakout. If we can fail this level, life is going to get messy again for our bullish colleagues.