Yesterday was a rather odd day for the four major equity indices, as the Russell 2000 (RUT) showed major divergence from its peers during its +3.5% rally that took price just below the 52-week highs of 2,135.46. Meanwhile, the Nasdaq-100 (NDX) dropped about -2.2% and the S&P 500 (SPX) fell about -0.87% yesterday, giving traders a significant discrepancy to consider as the week winds down. The Russell, which focuses on small-cap companies, often is viewed as being a more “risk-on” product than its peers. This means traders frequently look to it for directional clues about which way the other indices could move during the trading day, but yesterday’s activity threw this conventional relationship for a loop and the divergence is continuing in early trading for the accompanying futures products.

A +3.5% one-day move is noteworthy on its own, but the Russell also saw a significant breakout from its recent symmetrical triangle pattern. Price was bouncing around in an increasingly narrowing range, with the downward trendline beginning at the 52-week highs and the upward trendline starting at the Apr. 19 lows. Yesterday’s move blasted the RUT out of this range and above the last notable high point from mid-May. The move brings price well above many commonly followed moving averages, which are also trending upward.

There are some other technical points to note as well. Checking in with momentum, the Relative Strength Index (RSI) saw a sharp increase that took it above the 50-midline that separates bullish and bearish activity. However, it stopped just short of entering the overbought area, which typically would be viewed as a sign of further strength, so bulls should be on the lookout for this potential development. Another interesting piece of evidence is that price closed far above the upper boundary of the conventional Bollinger Bands study, which creates bands based on two standard deviations away from a 20-day simple moving average and is used to gauge how extreme a price move is relative to its recent history. A close above this upper level is once again usually regarded as a sign of further bullishness to come. Finally, the upside breakout from the triangle also cleared another significant area, which is the yearly Linear Regression Line (line of best fit) near 2076. This indicator, which is often used to gauge some idea of “fair value” for a financial product, coincidentally lined up closely with the upper line of the symmetrical triangle.

Many traders are now likely more curious about the potential upside resistance as price is knocking on the door of the yearly highs. This area near 2,135 is the first obvious point of potential resistance. Beyond that, the yearly +1 Standard Deviation Channel (one standard deviation above the Linear Regression Line) could be another potential area of interest and comes in near 2,197. To the downside, look for possible support at the confluence of the yearly Linear Regression Line and the now-broken downward trendline near 2,076. Beyond that, the 21-day and 63-day Exponential Moving Averages are clustered together near about 2,044.

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