Small Caps/Russell 2000 started diverging against the broad market last year (falling more than the S&P). The table below compares the performance of the S&P against the Russell, over the past 6-months.

performance spy russell jan 21

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Small caps have been almost twice as week as the broad markets over the past 6-months. We humbly feel they are at an important price point at this time at (1) below.

russell testing dual fib levels weak link jan 21

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We applied Fibonacci retracement levels to the 2011 lows/2015 highs (Blue Fib levels) and applied it to the 2009 lows/2015 highs. The 50% Fib level of the 2011 lows and the 38% Fib level of the 2009 lows, are coming together in a narrow price zone, that was almost hit at (1) yesterday morning.

Small Caps have been the weak link and we humbly feel what they do at this dual Fib retracement zone at (1) is very important. It would be a positive if the weak link would find support at (1).

If dual Fib does not hold at (1), rising channel support tied to the 2009 lows, comes into play near the 800 level.

We humbly feel its important to keep a close eye on the “weak link” at this price zone, as a rally in small caps here, is almost needed, if the broad market is to stop falling!