The S & P 500's impressive two-week surge could gain further steam if small-cap stocks join the rally, a chart analyst at Janney said Friday. "The power behind further rally efforts on the SPX can be supplied by small-cap benchmarks like the Russell 2000 — which have room for further mean reversion higher ahead," Janney's Dan Wantrobski said. The S & P 500 is up more than 1% this week, building on its massive 6.1% rally from the prior week. Those gains come as investors get more clarity on the Federal Reserve's monetary policy plans for later in the year. At the same time, the market seems to be shaking off concerns over the Ukraine-Russia war. The small-cap Russell 2000 index has lagged the S & P 500 this week, falling about 0.3%. It's also down more than 7% in 2022 — an even bigger year-to-date loss than the S & P 500's roughly 5% slide. Additionally, the Russell is trading below its 200-day moving average, a key long-term technical level watched by traders. However, the Russell 2000 is trading above the shorter-term 50-day moving average, which sets it up well to test the 200-day average, Wantrobski said. This could, in turn, add fire to the S & P 500's two-week rip. "The likely glide path for the S & P appears higher to us over the near-term because supporting small-cap indices such as the Russell 2000 remain oversold with the potential for further mean reversion higher (back to its declining 200-day)," he said.
Traders on the floor of the NYSE, March 25, 2022.
The S&P 500's impressive two-week surge could gain further steam if small-cap stocks join the rally, a chart analyst at Janney said Friday.