Chart of the Day - Monday, October 9, 2023

Today’s Chart of the Day was shared by Larry Thompson (@HostileCharts). The Russell 2000 ($IWM) continues to underperform the S&P 500 by a wide margin. It's lagging by about 12% year-to-date, and hitting 22-year lows on a relative basis ($IWM/$SPY lower pane). $IWM has been pinballing in a sideways range between $170 and $200 for over a year. Larry points out that it successfully tested the range's lower bounds again last week. $170 represents the 2018/2020 highs, and buyers have defended this level countless times since May 2022. Typically, the more times a level is tested, the weaker it becomes. Bulls can't afford to keep fumbling around $170. If $170 breaks, it would signal caution for the broader market. On an optimistic note, The Russell 2000 has historically outperformed the S&P 500 in the final months of the year, starting at the end of October.