Daily Market Commentary: Small Caps Breakout

It was looking good for all indices in morning trading, but bears were able to knock back the S&P back inside its base by the close of business. However, the Russell 2000 was able to post a breakout, even if it hasn't gone all the way to new all-time highs, it has made inroads into challenging the 'bull trap'.

The S&P will have another chance tomorrow. Today's weak finish was unable to undercut Friday's close, which will provide a platform for another push higher. The worry will be an undercut of the low on a gap down; it could panic rally participants into offloading in profit taking. The 50-day MA is the support zone.

The Russell 2000 has proven to be more attractive to buyers, and this may be stealing thunder from the S&P. Buyers may get more joy from this exchange. The Russell 2000 continued to make relative gains against the Nasdaq (which is gaining against the S&P).

The Nasdaq, while underperforming against the Russell 2000, is the only index at new closing highs.

For tomorrow, look for further gains in the Russell 2000, but if bears start aggressively (with a gap down), then the S&P may offer more rewards (with a target of the 50-day MA).


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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com.
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