S&P 500 Vs. Russell 2000: Are Small Caps Set For A Breakout?

The S&P 500 index remains in bullish territory, but it’s losing its shine compared to global markets.

JPMorgan analyst Jason Hunter notes that while the index maintains higher lows and pushes resistance levels, it's struggling to break past the 6,100 peak.

Big Caps Hold Ground, But Momentum Wobbles

With momentum cooling off, the path to the next milestone of 6,350 looks slow and choppy. ETFs like SPDR S&P 500 ETF SPY and the Vanguard S&P 500 ETF VOO continue to reflect this cautious optimism but aren't exactly screaming bullish right now.

Hunter points out that the S&P 500's current bullish trend remains intact as long as it holds above key support between 5,772 and 5,871. However, a break below 5,651 could jeopardize the broader uptrend. For now, investors might want to tread carefully while keeping an eye on key levels.

Read Also: Buffett Just Dumped His S&P 500 Holdings—What It Means for You

Small Caps Eyeing A Breakout

Meanwhile, the Russell 2000 index is quietly building steam. Hovering above key support at 2,150, the index is consolidating for a potential breakout past the 2,310-2,350 resistance zone. Hunter sees an eventual rally toward the 2,432-2,466 range if global cyclicals keep trending up.

For ETF investors, iShares Russell 2000 ETF IWM and the Vanguard Russell 2000 Index Fund ETF VTWO might be worth a closer look as small caps gear up for what could be a catch-up trade.

Interestingly, history suggests that when cyclical markets pick up, small caps tend to outperform. With global equity leadership broadening, the odds could tilt in favor of small-cap stocks outperforming large caps in the coming months.

Investor Implications

1. Hold the Fort: S&P 500 ETFs like SPY and VOO remain bullish but aren't the most compelling entry point unless the index decisively clears 6,100.
2. Watch the Underdog: Russell 2000's bullish setup favors ETFs like IWM and VTWO, especially if the index breaks past 2,350.
3. Global Check: Keep an eye on cyclical trends worldwide—they could fuel the small-cap rally while large caps tread water.

Would Small Caps Could Steal The Show?

Big caps are holding steady, but the real action could soon shift to small caps.

ETF investors, stay nimble—the underdog's moment may be just around the corner.

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Image created using artificial intelligence via Midjourney.