Why to follow the Russell 2000

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viktor_k67

Why to follow the Russell 2000 when the S&P 500 considered better tool to analyse market.

My opinion is that you have to follow it if you want to be beter than other and one step ahead of other. The Russell 2000 has the smalles (from Russell 3000) companies and smallest companies in times of worries are the first to get hit. See the charts below:

20160311-reversals-spx-chart.png


20160311-reversals-rut-chart.png

Charts courtesy of www.marketvolume.com
 
viktor_k67 said:
Why to follow the Russell 2000 when the S&P 500 considered better tool to analyse market.

My opinion is that you have to follow it if you want to be beter than other and one step ahead of other. The Russell 2000 has the smalles (from Russell 3000) companies and smallest companies in times of worries are the first to get hit. See the charts below:
More...

Sorry, but I don't see anywhere on your charts where the Russell is a leading indicator. In fact, any pullbacks pretty much parallel the S&P.
 
The S&P500 is the standard benchmark in the financial industry.

Small cap value * has been academically proven to produce highest decile alpha premium of all stock universes over 90 years
https://docs.google.com/document/d/1kToqLWLISRk4n4YnSzv1hT5kBN54l5CvhwGgDwJKPJI/edit?usp=sharing.
http://www.etf.com/sections/index-investor-corner/swedroe-small-caps-still-outperforming?nopaging=1
The Russell 2000 has mainly a "growth" composition yet is a strong contender for "investment" ( over the long term ). It is important to use an analysis tool that takes into account "total return" and we can see that the Russell 2000 beat the S&P500 ( VFINX index fund used here ) over a 16 year span using this calculator: http://tinyurl.com/jntxy4y
Additionally, it outperformed Berkshire Hathaway ( Warren Buffet ) over the same period tinyurl.com/jze9dzz. This little known outperformance fact that small cap is a "superior" index based on academia, gets lost in all of the focus on Buffet's genius and activities.

* Further, small cap "value" has outperformed the Russell 2000 over that sample tinyurl.com/z229923
It's important to stress that within the "trading" mindset, that having a core position of small cap value ( preferably within a tax deferred account such as a Roth IRA ) invested for the long term has provided superior compounded returns vs. other asset classes.
 
lindq said:
Sorry, but I don't see anywhere on your charts where the Russell is a leading indicator. In fact, any pullbacks pretty much parallel the S&P.
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They are in paralel, but reversal down starts with delay after the Russell 2000. Before March 2014 they aligned in time also. Now, S&P 500 reverses down with a delay. Yes, they both dive down in paralel - just Russell 2000 does it first. Let's see what indexes wil reverse first during the next reversal.
 
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The same, which should be as SPY tracks the S&P 500 and IWM tracks the Russell 2000.

The Russell started to decline at the end of June of 2015 while the S&P 500 was flat until the middle of August 2015. Russell 2000 dived down in Nivember 2015 and S&P 500 was still close to the resistance in the middle of december 2015.

I am not trying to convince any one. I made an observation and I posted. If you consider I am wrong that is fine with me.
 
Your right Russell is leading indicator. I looked through it also. The Russell isn't confirming the present short covering rally.
 
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