The Russell 2000 crushed the market prediction path and exploded higher this week on Republican’s tax plan. The idea is that small cap stocks are mostly domestic companies that are less able to take advantage of tax loop-holes and so they are the companies that will benefit the most from tax cuts.
Russell 2000 Market Prediction Chart Update
Due to the better than expected performance of the Russell 2000, I have updated the market prediction chart. I think we still get a pullback over the coming weeks but the pullback will be less severe as it tests $144 support.
The Russell 2000 usually doesn’t start rallying until late October as traders front-run the best 6 months of the year for the stock market (November – April). Could the front-running be starting early this year because of the pro-business Trump Administration? I’m not ready to declare that yet because I think it’s too early to start the Bull party. October is known as the Trick or Treat month of stock trading where things are usually good, or really bad. The month of October has seen its share of stock market crashes too as seen here.
I would like to see a pullback on the Russell 2000 as shown on the chart above, and then using a scaling strategy sometime around mid to late October. Please review this stock trading lesson on scaling into positions here.