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LIVE MARKETS-Small caps: Tossed around

Thu, 25th Mar 2021 13:05

* U.S. equity index futures suggest opening weakness

* U.S. initial jobless claims 684k vs 730k estimate

* U.S. Q4 GDP Final 4.3% vs 4.1% estimate

* Euro STOXX 600 index falls ~0.8%

* Dollar up; gold, crude down; U.S. 10-yr T-Nt yield ~1.60%

March 25 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at markets.research@thomsonreuters.com

SMALL CAPS: TOSSED AROUND (0900 EDT/1300 GMT)

The small-cap Russell 2000 is suddenly taking its
lumps. Indeed, the RUT has tumbled about 10% in just 7 trading
days, and is threatening to end a 5-month win streak.

Of note, the small-cap index flirted with a long-scale
monthly channel resistance line in February, as well as earlier
this month, and both times it has been swatted away:

On Feb. 10, the RUT reached as high as 2,318, putting it
just 1% shy of the channel barrier around 2,345. The index then
sold off as much as 10% in 16 trading days. And then on March
15, with its 2,360 high, it nearly tagged the line now residing
around 2,365. This more recent 10% slide has been accomplished
in less than half the time.

Meanwhile, over the past year, the RUT enjoyed a massive
snapback in relative performance vs the large-cap Dow Jones
Industrial Average. After falling to a 17-year low in
March 2020, the RUT/DJI ratio rose to 6-year high at 7.12% in
February.

Of note, since 1988, this ratio has struggled much beyond
7.0%, with its highs between 7.12% and 7.25%. Additionally, a
broken support line from 1999, which is now resistance, was
another hurdle coinciding with levels just over 7%.

Therefore, recently, the RUT appeared to be at an important
juncture as it attempted to continue its advance, while
sustaining its outperformance vs the large-cap Dow.

Now, in less than a month, the RUT has essentially suffered
two 10% corrections, and the RUT/DJI ratio is on pace for its
biggest monthly percentage fall in a year.

Given its recent leadership role, a greater RUT downturn,
both in itself, and on a relative basis, may coincide with
increasing overall market instability.

(Terence Gabriel)

*****

FOR THURSDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EDT/1300
GMT - CLICK HERE:

(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)

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