There has been a breakout in breakouts

This week has been one for the record books, in a number of different ways. Most spectacularly, the surge in small-cap stocks that pushed the Russell 2000 to its best-ever gain while hitting a new high.

The record-breaking rally in that index didn't occur in isolation, of course - the index rallied because many stocks within the index did. And enough of them rallied well enough to tickle 52-week highs. More than 15% of stocks within the Russell managed to score a fresh high on Wednesday, the most since 2016.

Small cap Russell 2000 members at 52 week high

There was a jump in other metrics that track the underlying health and momentum of small-caps. If we create a composite breadth indicator out of them all, then Wednesday's reading was the highest in several years. When this composite first jumped above 50, small-cap stocks tended to take a 1-2 week breather (except for the last 2 instances), but over the next year, the Russell 2000 showed a positive return every time.

What else is happening

These are topics we explored in our most recent research. For immediate access with no obligation, sign up for a 30-day free trial now.

  • Returns in the Russell 2000 and S&P 500 after composite breadth thrusts
  • What happens when there is a multi-year breakout in the percentage of securities at new highs
  • Looking at the makeup of sectors dominating the new high list
  • All industries and sectors have rising 200-day moving averages...and most stocks do, too
  • What Thursday's odd readings mean for forward returns
  • Looking at a comprehensive overall market breadth composite and what it says about the recent high in the S&P 500
  • Introducing a "Fed thrust" indicator
  • Is this a trend change in the U.S. dollar?
  • Looking at other huge 3-day drops in gold
  • What stocks have done when Nonfarm Payroll reports miss estimates

Stat Box

As of last week, "smart money" commercial hedgers were net short 28% of the open interest in corn futures, the most in 25 years. The only period where they were close to being this short was in May 2011.

Sentiment from other perspectives

We don't necessarily agree with everything posted here - some of our work might directly contradict it - but it's often worth knowing what others are watching.

1. Well, this is kind of insane. The picture says it all. [Citi]

citi panic euphoria

2. All that euphoria has helped trigger a move back into equity funds, with the largest 2-month inflow (as a percentage of total assets) in 7 years. [Deutche Bank via Daily Shot]

equity fund flows

3. What do you do when you expect stocks to rise? Tell people about it, of course! Bullish sentiment among Twitter users is getting high. [Callum Thomas, Topdown Charts]

twitter stock sentiment

The post titled There has been a breakout in breakouts was originally published as on on 2021-01-11.

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