Russell 2K Breaks Out on Robust Momentun on Triple Witching Friday

The Russell 2000 shot out of the gate on Friday, continuing the uptrend and recent breakout experienced following the Fed’s dovish announcement on Wednesday.  The Russell has been gaining traction as small cap stocks generally perform better than large cap stocks when the dollar is getting stronger.  Analysts believe this is the case because small-cap stocks have less international exposure than large cap stocks.

The technical picture on the Russell 2000 is very attractive.  Momentum has gained traction as the MACD (moving average convergence divergence) generated a buy signal.  This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread.  The index moved from negative to positive territory confirming the buy signal.  A buy signal on the MACD is a power indicator and generally points to higher future prices.

Friday is a triple witching day. This is an event that occurs when the contracts for stock index futures, stock index options and stock options all expire on the same day. Triple witching days happen four times a year on the third Friday of March, June, September and December.  Triple witching days are generally very high volume days and the breakout that has occurred on the Russell will likely generate large volume movements.

Support on the Russell is seen near the 10-day moving average at 1235.  Target resistance is now seen at an upward sloping channel trend line near 1,300.  The RSI (relative strength index) is moving higher with price action reflecting accelerating positive momentum while printing a reading of 66, which is on the upper end of the neutral range.