Russell 2000 (IWM)

IWM achieved target for H&S bottom but no decisive big base breakout yet

Small caps have struggled with the Russell 2000 (IWM) failing to decisively break out above its prior highs from November 2024 and November 2021 at 244-245 to confirm a 4-year big base. These highs are near the target for the March-June head and shoulders (H&S) bottom at 247, which IWM achieved in late September/early October.

Continued closes below the daily moving averages would provide an overhang

Yesterday's close below the zone the 13-, 26-, and 40-day moving averages (DMAs) from 246.27 to 243.90 could provide and overhang, exposing important chart support at 237.50 (late September and early October lows). Key chart resistance develops at 247.18-248.48, which is ahead of the October peaks at 252.21-252.72. Below initial support, the next major level comes in at 231.46-230.00.

Chart 1: iShares Russell 2000 ETF (IWM)

Do-or-die moment for IWM relative to SPY

IWM has lagged the S&P 500 (SPY) since mid October, triggering a retest of the breakout from the double bottom for IWM vs. SPY (Chart 2) and potential support at the daily Ichimoku cloud span (Chart 3). After failing to hold the push above a downtrend line from 2021, IWM has dropped below the declining 200-day moving average (DMA). It would take an immediate move back above this longer-term moving average to suggest a success retest of the double bottom breakout and cloud span support. The lower end of the cloud aligns with a 61.8% retracement of the April-October leadership trend for IWM, making this a critical (do-or-die) support zone for small cap leadership.

Chart 2: Small caps relative to large caps (IWM/SPY) with the 200-DMA

Chart 3: Small caps relative to large caps (IWM/SPY) with daily Ichimoku cloud span