About Time For The Small-Caps To Breakout

Technical Strategy | Jonathan Krinsky, Executive Director, Chief Market Technician | December 21st, 2014 (Read Report)

After one of the worst weeks seen in years two weeks ago, we came into last week noting how weak first half of Decembers typically set-up strong back-halfs. Wednesday and Thursday’s 2%+ rallies for the SPX were the first such back-to-back occurrence since March 2009. On average, this tends to be favorable for the following 1-2 weeks. Looking ahead to the “Santa Claus Rally,” which begins on Wednesday, we think there is likely a slight upside bias, but nothing like what we saw last week. We now shift our focus to the small-cap Russell 2000, which has essentially been dead money in 2014 (+2.77% YTD). After a year of consolidation, the set-up on the RTY looks much more attractive to us than at any point in the last 6-9 months. We are entering the “January Effect,” which favors small-caps over large, the 52-week high list is expanding, and we find many attractive individual base breakouts among the RTY (Read more)