Russell finally breaks out

Judging by Monday’s breakout from a bull flag pattern, we could see fresh buying momentum in small caps going forward.

The major US equity indices have been rallying sharply over the past several weeks because of growing expectations that the US and China will agree to a phase one trade deal, which could pave the way for an eventual end to the damaging trade war.

The markets have also been supported by major central banks loosening their monetary policies, with the ECB and Fed restarting their debt purchases.

As a result, investors have been piling into equities, especially into large-cap US names such as Apple and Microsoft. Consequently, we have seen repeated new record highs for the S&P, Nasdaq and Dow.

However, the small-cap Russell 2000 index has not been unable to join the fun in the same way.

Well, not yet anyway.

Source: Trading View and Please note this product may not be available to trade in all regions.

Judging by Monday’s breakout from the bull flag pattern shown on the chart, that has taken the index above old highs of 1600 and 1618, we could see fresh buying momentum in small caps going forward.

It remains to be seen however, whether the Russell will be able to surpass its old record high of 1745 set back in September last year.

In any case, the path of least resistance is clearly to the upside right now, although if the index fails to hold the breakout and we go back below the recent low at 1578 then in that case, the outlook would turn negative again.

More from Indices

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account