Small Caps in Big Trouble if They Fail Here

We’ve written on multiple occasions recently about the vulnerability of small caps and last Wednesday we pointed out that the underperformance of small caps looks to have resumed. The last few trading days have seen this trend continue, as chart 1 shows. What we want to point out in this post though is the fact that on a nominal price basis small caps, as proxied by the Russell 2000, have rallied back into pretty significant resistance and have for the last few sessions begun to struggle. If the weight of resistance turns the Russell 2000 lower from here it would paint a pretty grim picture from a technical standpoint.

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