Image Source: Pexels

Small-caps stocks have been a noticeable laggard for over two years.

But a recent year-end rally has set the Russell 2000 (IWM) on fire. Will this mark a change in performance in the future?

Today’s chart of the Russell 2000 ETF (IWM) highlights its underperformance (see blue shaded area where IWM has traded sideways for two years). The blue shaded area also represents the lower 50% of the high to low).

Note that the recent sharp rally has the Russell 2000 testing the 50% retracement line at (1)… and this is occurring as SentimenTrader trading sentiment reaches Extreme Greed. Just as Extreme Fear has marked bottoms in the past, Extreme Greed may be marking a top here.

In my humble opinion, what this 2-year market laggard does at (1) may just be important.

(Click on image to enlarge)

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