Small-cap Russell 2000: More thrust, or bust?
Main U.S. equity index futures edge red
Euro STOXX 600 index up ~0.1%
Dollar, gold up slightly; crude down ~1%; bitcoin down >2%
U.S. 10-Year Treasury yield dips to ~4.23%
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SMALL-CAP RUSSELL 2000: MORE THRUST, OR BUST?
The small-cap Russell 2000 .RUT is on track for its biggest monthly percentage gain since December of last year.
Meanwhile, a weekly momentum oscillator is nearing a significant hurdle suggesting traders are about to find out whether the recent thrust will persist, or if the breakout is about to go bust:
Since the release of below forecast CPI numbers on July 11, which have led to increased market expectations for Fed rate cuts, small caps have been rumbling. Indeed, since its July 10 close, the Russell 2000 has advanced more than 8%. The benchmark S&P 500 index .SPX has lost 1.2% over this time.
The RUT is now up 8.4% MTD which has it on track for its biggest monthly rise since a 12.1% surge in December of last year. And last week, the index reached its highest level since January 2022, though it still stands down about 10% from its November 2021 record high.
In any event, it's perhaps not surprising that the RUT's July rise has been powerful. Historical volatility measures were especially compressed just prior to its recent upside breakout.
That said, the RUT's 14-week Relative Strength Index (RSI), now at 67.35, is once again nearing the 70.00 overbought threshold.
The RSI was last greater than 70.00 in March 2021. Since then, and underscoring subsequent bear-market behavior, this oscillator has been consistently unable to muster enough strength to reclaim overbought territory.
Of note, the RSI exhibited a similar pattern of failures shy of the overbought level leading up the early-2020 pandemic crash.
(Terence Gabriel)
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FOR TUESDAY'S EARLIER LIVE MARKETS POSTS:
TRUMP STANDS IN THE WAY OF "BROADENING" TO NON-US STOCKS, CITI SAYS - CLICK HERE
THE $1 BILLION DISRUPTION - CLICK HERE
EUROPEAN STOCKS MOSTLY LOWER, GERMANY OUTPERFORMS - CLICK HERE
EUROPEAN FUTURES MIXED, EARNINGS KICK INTO GEAR - CLICK HERE
TESLA, ALPHABET EARNINGS TAKE CENTRE STAGE - CLICK HERE
RUT07232024 https://tmsnrt.rs/3xYmHyR
(Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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