From CNBC:

Small cap stocks may be on the cusp of a turnaround, as the Russell 2000’s underperformance this year may be a near-term setback, according to Fairlead Strategies market technician Katie Stockton. The Russell 2000 is currently off two percent for the year, while the S&P 500, Dow, and Nasdaq 100 have hit new all-time highs. Stockton believes the decline has shaken investors’ confidence in small caps. She also noted “an initial reaction to a short-term oversold condition” in the Russell 2000 ETF (IWM).

Stockton pointed out that the Russell 2000 rallied by almost 14% in the fourth quarter of last year, and she anticipates a better year for small caps after a difficult period with weak breadth. She also highlighted the positive divergences in momentum and improvement in relative performance, signaling a potential turnaround. CNBC’s Anna Gleason contributed to this article.



Read more: Why weakness in small caps may be a short-term setback