The chart of the Small-Cap index Russell 2000 could have been shaping a Head & Shoulder pattern with also a Double top pattern, where the Momentum oscillator has been on a declining slope divergence where the double top pattern appears more evident, providing hints of a Sell signal maturing for Small Cap stocks index. The Russell 2000 has been bubbling over an estimated 44.15 p/e ratio where investors have been piling in small-cap stocks on the prospect of the economic engine starting up again, while also banks have been largely profiting by the issuance of high leverage auto-callables index-linked products that have lured investors in the prospect of high returns, while U.S. benchmark indices have been largely pricing in new all-time highs. These high leverage products index-linked to the RTY and other U.S. index can amplify the swings in the whole index, although some technical indicators can give some hints of the -8.5% pullback structure hypothesis, considering the RUT 2120 100 days moving average and the RUT 2070 the potential support areas.
The wider positioning of the largest investors records Asset Manager and Institutional investors having the largest exposure to the Russell 2000 upside and for that, the most attentive to any broad-based small-cap index pullback, in so far stock market volatility would require Assets Managers to rebalance their stock portfolios allocated with small-cap stocks.
RUSSELL 2000 OPTION CHAIN FOR THE NEXT WEEK HAS SEEN CALL OPTION CONTRACTS BELOW THE RUT 2259 CLOSING, RISING IN PRICE AND OPEN INTEREST AS PROBABLY INVESTORS COULD HAVE BEEN HEDGING THEIR LONG INDEX EXPOSURES