Russell 2000: On sight for a potential fresh all-time high

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Russell 2000: On sight for a potential fresh all-time high

• Russell 2000 outperformance against S&P 500 and Nasdaq continued to persist since Q3 2024.


• The recent monthly Russell 2000 stellar performance of 10.8% in November has been reinforced by the incoming Trump administration's "America First" policy.


• Watch the 2,288 key medium-term support on the Russell 2000.

This is a follow-up analysis of our prior report, "Russell 2000: Soft to no-landing is supporting another bullish upleg" dated 7 October 2024. Click here for a recap.

Since our last publication, the price actions of the Russell 2000 comprised of small-cap listed companies in the US rallied as expected and finally retested its current intraday all-time high of 2,458 made three years ago on 5 November 2021 on Monday, 25 November.

The Russell 2000 is the only major US stock index that has not made fresh all-time highs in the past three years versus the S&P 500, Nasdaq 100, and Dow Jones Industrial Average which have skyrocketed to a series of fresh all-time highs in 2024.

Interestingly, the small-cap Russell 2000 has started to outperform the mega-cap technology-centric S&P 500 and Nasdaq 100 since the third quarter of 2024.

In November, Russell 2000 outperformance continued to persist where it recorded a monthly gain of 10.8%, almost double the monthly returns of the S&P 500 (5.7%) and Nasdaq 100 (5.2%). In addition, the Dow Jones Industrial Average also surpassed the S&P 500 and Nasdaq 100 with a monthly gain of 7.5% in November.

Trump's "American First" policy reinforces Russell 2000 outperformance

Fig 1:  Ratio charts of Russell 2000 & DJIA over Nasdaq 100 as of 29 Nov 2024 (Source: TradingView, click to enlarge chart)

The incoming Trump administration has vowed to enact generous corporate tax cuts and deregulation policies with the support of a Republican congress, it has created tailwinds for small-cap companies in the US.

In addition, recent trade tariff threats from US President-elect Trump towards China, Canada, Mexico, and the BRICS grouping of emerging economies have also provided a potential defensive impetus for Russell 2000 outperformance over the S&P 500 and Nasdaq 100 as Russell 200 component stocks derived most of their respective revenue streams (close to 80% on the aggregate) domestically in the US (see Fig 1).

The information technology sector has the largest market capitalization weightage in the S&P 500 and the Nasdaq 100 derives around 57% of its revenue from international markets that may be subject to headwinds from a potentially stronger US dollar, triggered by the effects of higher trade tariffs that may be imposed by the Trump administration.

Supported by rising 50-day and 200-day moving averages

Fig 2:  US Russell 2000 CFD Index major and medium-term trends as of 2 Dec 2024 (Source: TradingView, click to enlarge chart)

In the lens of the technical analysis, the price actions of the US Russell 2000 CFD Index (a proxy of the E-mini Russell 2000 futures) have continued to be supported by upward-sloping 50-day and 200-day moving averages that suggest its medium-term and major uptrend phases remain intact.

Watch the 2,288 tightened key medium-term support and clearance above the 2,450 key intermediate resistance (also the current all-time area) may see the next medium-term resistance zone coming in at 2,625/655 for the US Russell 2000 CFD Index (see Fig 2).

However, failure to hold the 2,288 key support negates the bullish tone to kickstart a potential medium-term (multi-week) corrective decline sequence within its major uptrend phase to expose the next supports at 2,170 and 2,080.

Source: Russell 2000: On sight for a potential fresh all-time high