The weight of the evidence in small caps keeps pointing in the same direction: higher.
The Russell 2000 has already completed a 4-year base and broken out to new all-time highs. When you break it down sector by sector, the underlying strength becomes even clearer.
Small-cap Industrials look great. Small-cap Tech is pushing toward new highs. Materials have gone near-parabolic, and even Biotech has been quietly working for some time.
But there’s one key group that hasn’t made its move yet: Small-cap Financials.
And that’s what makes this so interesting.
Small-cap Financials are now pressing against the upper bounds of an 8-year base.
This group accounts for more than 17% of the Russell 2000, making it the index’s second-largest sector.
A big chunk of that exposure comes from regional and community banks — some of the most economically sensitive stocks out there.
So think about the implications.
If Small-cap Financials break out from this massive base, it would be hard to come up with a more bullish confirmation for the Russell 2000 — and for the broader risk-on environment.
We’re already seeing broad participation across the index. Financials would be the final piece that completes the picture.
I really like how Customers Bancorp $CUBI is shaping up:
Check out that base.
Risk is clearly defined at those former 2022 highs, giving a clean level to manage against.
I only like to take a long position in CUBI if and only if we break above 78.
