Study: Russell leading the S&P is a bullish sign

Yesterday I wrote:

The Nasdaq and S&P are both up this year from January – May. However, the Nasdaq has massively outperformed the S&P by more than 6%. This is a bullish sign for the U.S. stock for the rest of the year (i.e. June-December).

It’s not just the Nasdaq that’s leading the S&P 500. Russell 2000 (small caps) is leading the S&P 500 too, having outperformed the S&P by more than 5% from January-May 2018.

This is also a bullish sign for the U.S. stock market for the rest of the year.

 

Here are all the historical cases in which the Russell 2000 outperformed the S&P by more than 5% from January-May (while both indexes are positive), and what happens next to the S&P for the rest of the year.

 

Click here to download the data in Excel.

Here are the historical cases in detail.

2006

The stock market trended higher throughout the rest of 2006, although it did so in a choppy manner.

 

2003

The stock market trended higher throughout the rest of 2003.

 

1996

The S&P trended higher throughout the rest of the year, although it did so in a choppy manner.

 

1991

The S&P trended higher throughout the rest of 1991, although it did so in a choppy manner.

 

1988

The S&P trended higher throughout the rest of 1988, although it did so in a choppy manner.

 

Conclusion

This is a medium term bullish sign for the stock market. It suggests that the stock market will trend higher throughout the rest of the year, even though it may do so in a choppy manner.

The stock market closed higher at year end (from June-December) every time.