Potentially Bullish Observations on Small Caps

Russell 2000 New 2-year Low & Propensity for October Troughs

We have carefully analyzed the Russell 2000 and identified several key observations that indicate the possibility of a favorable trading opportunity for small-cap stocks. To be more specific, the occurrence of new 2-year lows, for the first time in 2-years, historically correlates with positive outcomes over the subsequent 2 months out to 2 years, with the most remarkable returns occurring at the 6-month mark (8 instances of gains and none of losses and an average of +21.31%.) The second image below shows the Russell’s propensity to set major troughs in October based off of +/- 15% swings.