The Russell 2000 continues to drive higher. Since we noted a few weeks ago that it was waking up, the index has taken control. Like a child full of energy, it has been running full steam ahead for the past 3 weeks, gaining more than 7%. But kids eventually run out of gas and have to rest. Is that happening to the Russell 2000?
There are chart indications in the Russell 2000 ETF IWM that it may need to take a break soon. Momentum indicators show the RSI over 80 on the daily chart – it's highest since the move higher off of the financial-crisis lows. The MACD is also approaching the level where it topped in December last year. Both of these can continue to move higher.
There is no law that overbought cannot get more overbought. And this will lead to a lot of financial-pundit talk of a coming pullback. But remember that a correction can happen through time as well. Moving sideways could reset these momentum indicators.
On a longer scale, the latest move shows real Russell 2000 strength. If it does pullback over the next week, look at it as a buying opportunity.