Russell 2000 Declined 23% and 53% last two times this took place…its back!
When it comes to “Monthly Momentum” it can take a while to become very overbought or oversold. The Russell 2000 monthly momentum reached lofty levels back in 1998 & 2007. Once momentum support broke the Russell experienced declines ranging from 23% to 53%.
On the opposite front, when monthly momentum reached oversold levels back in 2003 & 2009, strong rallies took place (100%+).
The rally off the 2009 lows now has monthly momentum higher than it was in 2007 and near the 1998 levels. Recently momentum is turning down and breaking support as the Russell is near a 14-year resistance line.
When lofty monthly momentum broke support in the past, small caps struggled to make much more upward progress in the following years.
Is a slippery slope ahead for small caps? Will it be different this time? Stay tuned, this could be very important for small caps!!!
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