It has been quite a week in the markets this past week. With the continuing trade disputes, the markets continue to “grind” higher with increased hope the tariff disputes will find a resolution as the US Administration continue to hold talks with other countries on new trade agreements including China. President Trump continues to roll out his tariff program, impacting trading across world markets. This week, he announced that tariffs on semiconductors are coming soon and Trump appears to be targeting the health care sector next. Yesterday he threatened to raise tariffs on India over its purchases of Russian Crude oil. With all the “noise”, lets examine how various markets worldwide have performed over the last week. Mainland China (FLCH) was up +0.96%, Taiwan (FLTW) was up +1.82% and South Korea (FLKR) down -0.40%. Meanwhile, Latin America led with Peru (EPU) up +4.54% and Brazil (FLBR) added +3.09% and Argentina (ARGT) was up at +3.43%. Europe followed with some strength across the board with Spain (EWP) gaining +3.31%, and Turkey (TUR) up +2.38%. Australia (FLAU) was also up +1.41%. Here on our side of the world a bit more of a muted story as well in the last week as the S&P 500 Index was down -0.28%, the Nasdaq Composite up +0.19% and the Smaller Cap Russell 2000 Index down a little less than its larger cap counterparts at -0.50% in the past week. Here in Canada, the S&P/TSX Composite Index was up +2.01% for the past week and the smaller cap S&P/TSX Canadian Small Cap Index was up +1.81 but up +2.37% in the last month. Since the Russell 2000 Index and S&P/TSX Canadian Small Cap Index seem to be holding up reasonably well in these uncertain times, lets examine how the Russell 2000 Index (RLS.I) and the S&P/TSX Canadian Small Cap Index (TX20.I) has fared in this edition of the Equity Leaders Weekly
Russell 2000 Index (RLS.I)
The Russell 2000 Index is a small-cap U.S. stock market index that makes up the smallest 2,000 stocks in the Russell Index.In looking at the point and figure chart of RLS.I at a 2% scale for an investment grade analysis, we see a nice, rounded bottoming pattern from late 2021 to late 2024 where the index reached 2431.11 in November 2021 and the index trended downwards to the trough at 1668.79 where it found support three times in June 2022, Oct 2022 and Nov 2023. Then the rounded bottom turned up since then hitting the peak at 2431.11 in Dec last year before the bears re-asserted themselves at the beginning of the year driving the index down to 1770.93 in April. As the markets recovered since the Spring, the Index reversed into a strong column of X’s lasting 12 boxes without a 3 box reversal. This is an early encouraging sign the small cap US index is participating in this environment where the market continues to climb a “wall of worry.” The 2479.73 level is an important level to watch for upcoming resistance. If the shares can break above this level, a new all time high will be achieved and would confirm that “market breadth” is healthy as this signifies the “soldiers are following the generals” in the US Equity Market. To the downside, support is at its 3 box reversal of 2074.93 and, below that, 1879.33. RLS.I currently exhibits a bullish Low Pole Warning Pattern. However, with an SMAX score of 5 out of 10, RLS.I is still not showing a lot of near term strength against the asset classes at this point.
S&P/TSX Canadian Small Cap Index (TX20.I)
The S&P/TSX Canadian SmallCap Index provides an investable index for the Canadian Small Cap Market. The index is float adjusted, and market cap weighted and was developed with industry input as the ideal benchmark for those with small cap exposure of the Canadian equity market.
In looking at the point and figure chart of TX20.I we see a much more favorable story as the Canadian Small Cap Index has already achieved all time high territory when the index broke above a key prior resistance point at 861.52 which is a significant break out to the upside as this level was achieved in Nov 2021, April 2022, and Dec 2024 but has since risen above this level in June to new all-time highs. Currently the index is in a very strong rising column of X’s lasting 14 boxes without a 3 box reversal. Since we are in new discovery territory it will be interesting to see where this index settles itself. Upcoming resistance can be found at the all important round number and psychological number of 1000.00 so in the Point and Figure chart, 989.62 to 1009.41. To the downside, if the small cap index turns down, support is at its 3 box reversal of 878.75 and below that, the prior breakout point at 844.63. With an SMAX Score of a perfect 10 out of 10, TX20.I is showing very strong near term strength against the asset classes.
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