{"id":28706,"date":"2026-10-14T07:30:00","date_gmt":"2026-10-14T11:30:00","guid":{"rendered":"https:\/\/jeffclarktrader.com\/market-minute\/?p=28706"},"modified":"2026-10-13T14:12:25","modified_gmt":"2026-10-13T18:12:25","slug":"why-small-caps-are-set-to-lead","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/why-small-caps-are-set-to-lead\/","title":{"rendered":"Why Small Caps Are Set to Lead"},"content":{"rendered":"\n

Forget about the Mag 7. If there\u2019s going to be a year-end rally in the stock market, it\u2019s going to be led by the small-cap stocks. <\/p>\n\n\n\n

The Russell 2000 Index \u2013 an index of 2000 small-cap stocks \u2013 has had a wild year so far. After bottoming in late-March, the index led the broad stock market higher for five months as it gained nearly 30% versus a 22% gain in the S&P 500.  <\/p>\n\n\n\n

For the past several weeks, though, the S&P 500 has been powering to new all-time highs while the Russell 2000 has fallen 9%. <\/p>\n\n\n\n

It is this decline, however, that has set the stage for a rally into the end of the year. <\/p>\n\n\n\n

Take a look at this chart of the iShares Russell 2000 ETF (IWM)\u2026 <\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

The action over the past few weeks has created a bullish falling wedge pattern on the chart. Meanwhile, as IWM has been making a series of lower lows, the momentum indicators at the bottom of the chart have been rallying. This sort of \u201cpositive divergence\u201d is often an early warning sign of an impending rally. <\/p>\n\n\n\n

IWM closed Tuesday near the support line of the wedge. It\u2019s also sitting right above the support line connecting the April and May lows. And, there\u2019s additional support just below near $270. <\/p>\n\n\n\n

All these factors should limit any potential downside in IWM from here. <\/p>\n\n\n\n

At the same time, IWM is approaching the apex of the wedge pattern. It will likely break out, one way or the other, within the next several days. A break to the downside should quickly find support at the levels indicated \u2013 which should then lead to a bounce attempt. <\/p>\n\n\n\n

A breakout to the upside, though, should lead to an immediate rally towards the 50-day moving average line above $290. And, if IWM can power able that level, there\u2019s a good chance it will be headed to its all-time high near $305. <\/p>\n\n\n\n

In other words, the current setup in IWM shows about $8 of downside risk while the upside offers a reward of as much as $28. <\/p>\n\n\n\n

There\u2019s no guarantee, of course. There never is in the financial markets. But, if the stock market is setting up for a year-end rally, and if the \u201crotation\u201d action we\u2019ve talked about previously is going to play out, then traders should be looking to buy into the small-cap sector on any weakness over the next few days. <\/p>\n\n\n

Best regards and good trading,<\/p>\n

\"Signature\"<\/p>\n

Jeff Clark
\nEditor, Market Minute<\/em><\/p>","protected":false},"excerpt":{"rendered":"

A falling wedge on the Russell 2000 says its time to buy…<\/p>\n","protected":false},"author":2759,"featured_media":0,"comment_status":"closed","ping_status":"0","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[7],"newsletter-type":[],"ticker":[],"class_list":["post-28706","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-jeff-clark"],"acf":[],"ai_tts_audio_outdated":true,"ai_tts_content_changed_at":"","ai_tts_content_changed_during_generation":false,"ai_tts_legacy_post":false,"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/28706","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/2759"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=28706"}],"version-history":[{"count":7,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/28706\/revisions"}],"predecessor-version":[{"id":28733,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/28706\/revisions\/28733"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=28706"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=28706"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=28706"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=28706"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=28706"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=28706"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=28706"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}