A big jump by previously left-behind small-cap shares has bulls looking for a broader, healthier U.S. stock-market rally, but one closely followed technical analyst is urging investors to proceed with caution.
The small-capitalization Russell 2000 RUT rallied around 7% over the last four trading days through Wednesday, the largest such move since last November, noted Jonathan Krinsky, chief market technician at BTIG. The S&P 500 index SPX was up 0.5% on Thursday, trading near 4,290 and not far below the 4,292.44 level, which a close above would mark the large-capitalization benchmark’s exit from a bear market. The S&P 500 is up nearly 12% so far in 2023, with the gains heavily concentrated in megacap, technology-related stocks. The narrowness of the rally has stoked concerns about its durability.
The last two days saw over 2 million call options trade, he noted , the second-largest two-day volume in data going back to 2000 since Dec. 22-23, 2009. Both Wednesday and 2009 were ex-dividend dates for IWM, which may have influenced the figures somewhat, he said, but warned that put/call ratios in favor of calls continue to suggest “complacency.”