A surge of small proportions

Out of all the major indexes, none are benefitting from the positive vaccine developments more than the Russell 2000 index of small-capitalization stocks.

Even without Monday's massive rally, it has performed well enough that its medium-term trend has jumped well above its long-term one, thanks to a kick-off surge in early October. Respected technician Helene Meisler noted that the 50-day average of the index has moved the most above its 200-day average since 2017.

Russell 2000 spread between 50 and 200 day average

While there have been wider spreads between the two trend measures, by the time it reached 8%, it has been a good sign for the index. 

Returns were okay over the short- to medium-term but really shined over the next year. There were no losses out of the 11 signals, and the risk/reward was impressively skewed to the upside.

What else is happening

These are topics we explored in our most recent research. For immediate access with no obligation, sign up for a 30-day free trial now.

  • Russell 2000 returns after big spreads between the 50- and 200-day moving averages
  • What happened to the broader market after those signals
  • Monday's surge helped trigger another Zweig Breadth Thrust
  • The S&P 500 suffered a breakout and reversal - what that's meant for forward returns (it's probably not what you think)
  • The Dow Industrials outdid the Nasdaq 100 by more than 5%
  • For the 1st time in 8 months, the Dow hit a new intraday high

Stat Box

Energy stocks surged on Monday and are up more than 19% less than 10 days after sinking to a 6-month low. Going back to 1926, they've done this only 6 other times. After 5 of them, the sector fell back over the next 1-3 months.

Sentiment from other perspectives

We don't necessarily agree with everything posted here - some of our work might directly contradict it - but it's often worth knowing what others are watching.

1. Investor behavior has allowed financial conditions to improve to the best in years - Goldman Sachs via Daily Shot

2. Investors on Twitter have never been more optimistic - Arbor Research

3. That's probably why they're buying a lot of call options - Urban Carmel

The post titled A surge of small proportions was originally published as on SentimenTrader.com on 2020-11-10.

At SentimenTrader.com, our service is not focused on market timing per se, but rather risk management. That may be a distinction without a difference, but it's how we approach the markets. We study signs that suggest it is time to raise or lower market exposure as a function of risk relative to probable reward. It is all about risk-adjusted expectations given existing evidence. Learn more about our service , research, models and indicators.

Follow us on Twitter for up to the minute analysis of market action.

Not ready to signup up for a free trial yet?

Signup for our Daily Lite email to receive highlights of our daily report, research and studies.

Follow us on Twitter:

Subscribe to our Youtube Channel:

RSS Feed

Subscribe to the Blog RSS feed