Buyers have come for the little guys

It's been one heck of a nice couple of weeks for small-cap stocks. As recently as a few weeks ago, there was a lot of talk about their relative weakness and how they tend to lag during Q4. Not so much anymore.

Over the past two weeks, the small-cap Russell 2000 has surged more than 11%, one of its largest 10-day gains since inception.

Small cap Russell 2000 10-day 10% rally

This kind of rebound typically happens after severe weakness, either on a relative or absolute basis. Either way, there have been only 20 distinct times over the past 40 years when the index shot higher by at least 10% over a 10-day stretch. 

When buying interest was so intense, it tended to generate even more excitement. During the next month, there was a 60% probability of a big rise versus only a 5% probability of a big drop.

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We also looked at:

  • Full tables showing forward Russell 2000 returns and the probabilities of a big gain or big loss over various time frames
  • How surges in the Russell impacted the broader stock market
  • This year has seen a near-record number of 80% up days
  • More and more stocks are rising above their 200-day moving averages
  • Emerging market stocks are throwing off MACD buy signals
  • The Dow Transports hit a new high for the 1st time in 2 years - how it's responded in the past (hint: not great)

The post titled Buyers have come for the little guys was originally published as on on 2020-10-09.

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