Russell 2000: Is the Bullish Rally Set to Continue?

The Russell 2000 recently saw a sharp pullback on 26 October, temporarily interrupting its otherwise strong bullish rally. Over the past week, however, the index has rebounded with a significant bullish revaluation. This raises the question: is the Russell 2000 ready to resume its upward trend, or is this a short-lived break in momentum?

Strong Recovery After Pullback

Since the rally began in early April, the Russell 2000 has shown consistent strength. The recent regression was influenced by interest-rate concerns and natural profit-taking, causing the RSI to fall to around 31, a level often associated with oversold conditions. This may have created a buying opportunity, helping fuel the recent recovery as traders stepped back in and pushed prices higher.

Technical Indicators Support Further Upside

Momentum could continue improving, with the weekly MACD starting to diverge back into bullish territory and the RSI climbing towards healthier levels. These indicators suggest that sentiment may remain positive in the short to medium term.

Fundamental Support: Rate-Cut Expectations

Recent economic data shows signs of a slowing US economy, increasing expectations that the Federal Reserve may cut interest rates. Lower borrowing costs generally benefit small-cap companies, helping to support the Russell 2000’s upward move and boosting investor confidence.

Outlook for Traders and Investors

The short-term outlook suggests potential gains for traders taking advantage of renewed momentum, while the long-term fundamentals for small-cap stocks remain supportive. If rate-cut expectations persist and technical indicators continue strengthening, the Russell 2000 may stay on its bullish path.

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