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Russell ETF Breaks Out as Small Caps Take the Lead

David Becker
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A strong breakout should hold, and continue to drive the broader markets. The Russell 2000 ETF (IWM) broke out with big moves over the last four weeks and it is important that these breakouts hold. A peak below the March highs and a failed breakout would be quite negative. It has not happened yet so the chart remains bullish.

IWM breaking the wedge trend line, breaking above the 200-day moving average and exceeding its May highs with a move above 116 this month. This breakout is clearly bullish until proven otherwise, which means it needs to hold. The broken resistance zone and rising 200-day moving average combine to mark a support zone in the 111-113 area. A close below 111 would negate the breakout and call for a reassessment of the chart. The (IWM:SPY ratio) is breaking above resistance from the mid May highs as IWM starts to outperform SPY again, which is a very bullish sign for equities in general.

The Russell 2000 ETF can be divided into the Russell 2000 Value ETF (IWN) and the Russell 2000 Growth ETF (IWO). The value ETF shows more strength than the growth ETF, but the growth ETF has started to outperform the value ETF on a relative performance basis. The Russell 2000 Growth ETF within a clear uptrend over the last eleven months. The ETF hit a new high in March, corrected with a wedge in April-May and resumed its advance with a breakout in late May. The IWN came within 1 cent of its March high last week. IWN is much closer to its March high than the Russell 2000 Growth ETF and this means it shows more strength.

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