US small cap bounce unconvincing despite risk revival

The recovery in US small caps has been unconvincing over the past fortnight, struggling for upside unlike mega-cap rivals. Russell 2000 futures have been capped below the 50-day moving average for much of this period, running into sellers constantly above this level. Wednesday’s rejection above 2132.6 warns of building reversal risk, putting a potential break of uptrend support on the cards should US slowdown fears return.

If the price were to break the uptrend, traders could enter shorts with a tight stop either above the level or the 50-day moving average for protection, depending on your target. On that subject, the 200-day moving average or 1920 are levels to consider. If the price were to hold the uptrend, a close above the 50-day moving average would negate the bearish setup.

MACD and RSI continue to generate bearish signals on momentum, making selling rallies the preferred strategy near-term. Good luck!

DS