Markets are going wild, but small-cap stocks are holding up — here's the next move

The markets received a volatility injection in the last week, and small-cap stocks are no exception. But one market strategist is arguing that on a technical basis, the Russell 2000 index is holding up well relative to its large-cap peers and is well-positioned going forward.

While the Dow Jones industrial average, S&P 500 and Nasdaq Composite have all fallen around 5 percent in the last week, the small-cap stock index has declined a little more than 4 percent. On Wednesday, the Russell 2000 closed the day barely positive while the Nasdaq Composite, S&P 500 and Dow all closed in the red.

Matt Maley, equity strategist at Miller Tabak, said the Russell 2000 should be positioned to outperform. Here are his reasons.

• The small-cap index is generally composed of domestically centered companies, which makes it particularly sensitive to moves in the U.S. dollar index.

• After a 14-month decline, the dollar index is finally starting to see a bit of a bounce. This comes on the heels of extremely oversold conditions, and sentiment has become quite bearish around the greenback.

• During this week's broad market decline, the Russell managed to bounce strongly off its 200-day moving average. That line proved great support for the index last year, so this resilience is positive on a technical basis.

• The technical picture, coupled with an expected bounce in the U.S. dollar, says the Russell is an index that outperforms going forward.

Bottom line: The Russell 2000 index could be well-positioned going forward as it appears to be holding up better than its large-cap peers amid a broader market sell-off.

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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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