The small-cap Russell 2000 index, comprising the smallest 2,000 companies in the broader Russell 3000 by market capitalization, reached an important milestone on Tuesday. Technicians refer to this milestone as a “golden cross,” where the 50-day moving average surpasses the index’s 200-day moving average.
What is a Golden Cross?
A golden cross is considered a bullish signal, suggesting a strengthening uptrend. The 50-day moving average represents an asset’s short-term price trend, while the 200-day average indicates the long-term trend.
According to Dow Jones Market Data, the small-cap gauge RUT’s 50-day average has not closed above the 200-day average since January 25. The last time the Russell 2000 witnessed two golden crosses in a year was in 2019.
Potential Market Implications
Historical data dating back to 1987 indicates that after a golden cross, the Russell 2000 tends to experience positive momentum. In the three and six months following a golden cross, the index has gained an average of 2% and 4.3% respectively, based on Dow Jones market data.
Comparing Performance to Peers
While the Russell 2000 has recently lagged behind its peers, it has still managed to see an 8% increase in value this year. In comparison, the S&P 500, which represents large-cap stocks, has gained 15%, and the tech-heavy Nasdaq Composite has rallied by an impressive 31%.
It remains to be seen how the small-cap market will perform in the coming months. As always, market conditions are subject to change, and investors should carefully evaluate their options before making any decisions.
Note: This report includes contributions from Ken Jimenez.
