The Russell 2000 Small Cap index was down -20.4% from the peak in June 23rd 2015, crossing the -20% bear market threshold. The $RUT is already below support that represents the neckline of its head-and-shoulders topping pattern. Downside potential is to the 2007 and 2011 highs around 860. The breakdown falls within the period of seasonal strength for small cap companies that runs through to the start of March. Risk aversion is weighing on the notorious January effect when investors tend to take on risk at the start of the year. The $RUT has been underperforming the $SPX since early 2014, seemingly as “leading indicator”.
