Arbitrary milestone achieved!
Will we hit 1,000 or 3,000 next?
Everybody get ready for everyone else to call a top!
Considering it hit the low of 666 on March 9, 2009, it has tripled ever since.
3,000 more likely than 1,000 IMO but not any time soon and not without some draw downs.
S&P ripping while R2K is struggling (+1.6% YTD). Smart money is rotating into more liquid names.
You think it is a liquidity issue? To be honest, I have been invested in RTY for a few months and have been disappointed that I did not just keep the money in SPX like I have done in the past. I suppose it makes sense, since people who have been buying don’t really want the risk, so they choose “quality” names over small cap… But from my point of view, I have mostly observed the weird effects on volatility surface, i.e. abnormal steep skew and weird 7% vol OTM calls.
I don’t have any objective evidence, but it seems like the market is rotating into more liquid names. The distribution in the R2K is obviously much wider than the S&P 500 (more stocks, smaller and more volatile). Since I only play in the swamp and never look at S&P stocks, my observation is that many R2K stocks are struggling, particularly the higher beta momentum names. I should look into exact distribution and sector data but yes, it feels like a rotation up the cap chain. I am kind of surprised how much the S&P has ripped lately.