Small cap stocks may be on the cusp of a turnaround.According to Fairlead Strategies market technician Katie Stockton, the Russell 2000’s underperformance so far this year is likely a near-term setback.”We’re kind of convinced that we’ll see small caps do better. Maybe they don’t outperform strongly. But a better year for them after what was a very difficult year for them because breadth was so weak, ” the firm’s founder and managing partner told CNBC’s “Fast Money” on Wednesday.So far this year, the Russell 2000 is off two percent. Meanwhile, the S&P 500, Dow and Nasdaq 100 have hit new all-time highs.Stockton believes the Russell 2000’s decline has shaken investors’ confidence in small caps.’Short-term oversold condition'”We want to sort of re-instill that confidence because we’ve seen an initial reaction to a short-term oversold condition — that’s IWM or the Russell 2000 ETF,” she said. “With that, we have improvement in relative performance: Long-term downside momentum versus the S&P 500 has improved.”The Russell 2000 is coming off a strong fourth quarter. It rallied by almost 14% in that period.”For IWM, we saw a pretty major trading range breakout in Q4,” Stockton said. “It’s something that we had anticipated because there were some positive divergences in momentum as it had gone sideways with a ton of volatility.”CNBC’s Anna Gleason contributed to this article.Disclaimer …
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[mwai_chat context=”Let’s have a discussion about this article:nnSmall cap stocks may be on the cusp of a turnaround.According to Fairlead Strategies market technician Katie Stockton, the Russell 2000’s underperformance so far this year is likely a near-term setback.”We’re kind of convinced that we’ll see small caps do better. Maybe they don’t outperform strongly. But a better year for them after what was a very difficult year for them because breadth was so weak, ” the firm’s founder and managing partner told CNBC’s “Fast Money” on Wednesday.So far this year, the Russell 2000 is off two percent. Meanwhile, the S&P 500, Dow and Nasdaq 100 have hit new all-time highs.Stockton believes the Russell 2000’s decline has shaken investors’ confidence in small caps.’Short-term oversold condition'”We want to sort of re-instill that confidence because we’ve seen an initial reaction to a short-term oversold condition — that’s IWM or the Russell 2000 ETF,” she said. “With that, we have improvement in relative performance: Long-term downside momentum versus the S&P 500 has improved.”The Russell 2000 is coming off a strong fourth quarter. It rallied by almost 14% in that period.”For IWM, we saw a pretty major trading range breakout in Q4,” Stockton said. “It’s something that we had anticipated because there were some positive divergences in momentum as it had gone sideways with a ton of volatility.”CNBC’s Anna Gleason contributed to this article.Disclaimer …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]
