Russell Takes a Much-Needed Pause — But The Bull Isn’t Done
Extended
The Russell is reversing near the upper end of its large trend channel, a normal pause after the powerful squeeze in small caps. Note how extended Russell still remains above the 50-day MA.
Source: LSEG Workspace
Too much too fast?
The IWM/QQQ ratio has moved aggressively higher over the past 2 months. We are seeing a much needed pause.
Source: LSEG Workspace
Haven't seen this in a while
Russell volatility trading with a gap vs VIX for the first time since mid November.
Source: LSEG Workspace
Room to move
An ugly Russell candle to end the week, but zooming out, the setup still leaves room for further upside if rotation starts to pick up more meaningfully "decade-to-date $1.6tn inflow to US large cap vs. $6.1bn outflow from small cap" (BofA)
Source: BofA
Recent Russell squeeze
Zooming out again for some longer term perspective.
Source: BofA
Trump pivoting
With approval slipping, Trump is pivoting aggressively to address affordability through direct government intervention rather than traditional monetary, fiscal, or trade policy. The strategy targets corporate margins, energy, healthcare, credit, housing, and power, shifting pressure from “big” incumbents toward smaller and mid-cap beneficiaries. This strengthens the case for small and mid-caps as the Main Street, reshoring, and manufacturing trade into the midterms.
