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What If the Russell 2000 Stabilizes?


The bulls have shown serious mettle this year, and a shot past S&P 2000 is not out of the question.

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The Russell 2000 (INDEXRUSSELL:RUT) is outperforming this morning.

As of the time I'm writing this, it's creeped into positive territory, up 0.2% while the S&P 500 (INDEXSP:.INX)is down 0.2%.

Much has been made of the Russell's weakness vs. the big caps in 2014, and incidentally, this would be a good time for the Russell to get back in gear.

I created a 5-year weekly chart showing spikes in Russell 2000 outpeformance vs. the S&P 500:

Click to enlarge

Following each big spike, the broader averages turned down.

What we haven't seen following 2013's monumental run is the major averages declining along with the Russell (as has happened in past years), mostly due to megacaps like Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), as well as select sectors like biotech, holding us up.

One day does not a trend make, but it's worth asking -- if the Russell is stabilizing, having pulled back to something resembling performance parity with the S&P, does that mean we're reloaded for a shot through S&P 2000?

Remember, the bulls have shown a lot of mettle this year and we're just 3% off the highs. They're not broken and a resurgent Russell could embolden them.

Twitter: @MichaelComeau

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