Small-Cap Index (as a leading indicator)

By: ShortMeTina

If you’re relatively new to the investing world, you’re probably wondering why everyone seems to be celebrating the ‘recent’ strength of the small-cap index. 
 
As with anything else in trading, this is up for debate but many investors look to the small-cap index (RUT) as a leading indicator of the economy and the overall strength of the stock market. 

In other words, the recent break out in the RUT is ‘signaling’ to investors that this bull market is real and perhaps, here to stay for a long time. 
 
The small-cap index has lagged the S&P 500 for almost all of 2017.  In fact, the index has traded within a well-defined range for most of 2017 and finally broke out last month on above average volume. 
 
To put it into perspective, so goes the small-cap index, so goes the entire stock market. 

​If this indicator does in fact signal that; it may be time to liquidate all our short positions and get long or get left behind. 

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Look below for a comparison of all the 4 major indexes.  Notice the sideways action of the Russell vs. the other indexes?  

(click image to enlarge)

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Russell trading within a well defined box for majority of 2017.  

(click image to enlarge)

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Good, Bad or Ugly comment below.  

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