And the ETF of a small cap index at that?

Its a simple answer to a not so simple question. Over the Past 10 years. That might not be the definite answer, so let us look at a hypothetical investment in both. This is return of A return of The ETF acts as a stock on the exchange and can be held, short, and is also optionable. The Russell in comprised of small cap stocks, which may be more volatile than large caps, but also have a lot of potential for growth and gains.

Cboe To List Mini-Russell 2000 Index Options

The other way to trade the ETF, maybe more favorable for those who do not want to hold the ETF for years on end, is…options! Which can present traders and investors alike a lot of opportunity in the small cap market. From speculation to hedging. The IWM ETF has an extensive options chain, with multiple expiry dates which is wonderful for traders that want to take advantage of the short term volatility in the ETF. Especially at times of massive bull spikes or bear spikes.

Stagnant time periods are also opportunistic in options as one could write credit spreads on the IWM options to generate premium. Another key fact about the Russell Index is that it is the bottom or smallest stocks in the Russell index. In addition to these stats, what makes the Russell Index unique is the types of stocks that make up the 1, companies listed.

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Remember, small and mid-size companies are the engine that fuel growth. No one expects the next technological innovation to come from IBM. Also, the Russell Index has stocks from all types of industries: retail, housing, technology, finance, etc. So again, more representative of the entire U. Lastly, the Russell Index value is weighted by the total number of shares outstanding by the price value of the stock. This is different than most other Indexes which base their value on the full market capitalization.

You can use any Index to try and gauge the direction of the market. However, I would much rather use the Index with a large number of healthy stocks to determine where things are going. So this graphic clearly contradicts my point about the Russell having so many stocks, because the NYSE has just as many and the Nasdaq has more stocks listed.

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The key difference which is not represented in this graphic is the Russell again has small and midcap stocks. No more panic, no more doubts. For this first strategy, the first part of our hypothesis is that divergence between the Russell Index and other Indexes lead to changes in market trend. Please do not interpret this to mean if the Russell Index is up at noon, then the Dow Jones is surely to follow suit by end of day.

3 Trading Ideas for Small-Cap Bears

Think of the leading indicator in the context of when major lows and highs present themselves in the market. Russell and Dow Jones Price Divergence. Notice how the Russell continued pushing to new lows in mid-February, while the Dow Jones held up. Here comes the tricky part — you need to decide which way the market is going to break.

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From this example you can see that the bears were unable to keep the Index beneath its prior low. This bit of data in combination with the higher highs in the Dow Jones were your clues it was time to get long.

When you strip it down to the brass knuckles, tactics that worked 50 years ago are still in play today. When it comes to identifying the direction of the market and its likely path going forward, trend lines are still at the top of the heap in terms of providing quality signals. For more stats, check out our article. With the Russell Index RUT still sitting near the highs after the parabolic rise, the index has settled into a narrow price range, working off its overbought readings as measured by the RSI through price consolidation rather than a pullback.

Since then, the Russell is down by less than a point while its volatility index RVX sits at With equity volatility sitting at record lows over the past several months, it can be uncomfortable to get long the markets at these levels. And for the less aggressive traders, waiting for a 50 day RVX peak — currently

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