Small Is the New Big—Russell 2000 Now Facing Historical Resistance
04/10/2015 7:00 am EST
Chris Kimble, of Kimble Charting Solutions, shares how small-caps have outperformed large-caps in the past six months and points to a key level to watch since what the Russell does at this resistance line could be very telling about where small-caps could be months from now.
The Power of the Pattern shared last October that the Russell 2000/S&P 500 ratio was on multi-year support, as small-caps had been weaker than large-caps for the prior 10-months. The ratio on support was suggesting this pair trade—Long Russell 2000/Short S&P 500.
The lower right inset chart reflects that small-caps have outperformed large-caps by nearly 11% in the past six months.
Below is an update on the Russell 2000/S&P ratio. As you can see, small has been the new big since October. Now momentum is getting lofty.
Key to the top chart…the Russell 2000 is now facing a very key resistance test above, tied to its highs in 1998 and 2007, with the Russell/S&P ratio reaching lofty levels.
What the Russell does at this resistance line could tell us a ton about where small-caps could be months from now.
By Chris Kimble, Founder, Kimble Charting Solutions