The Russell 2000 had a sharp rally in late 2020 and early 2021. Now it may be setting up for a similar move.

Notice the triangle forming on the small cap index recently, which is interesting for two reasons.

First, it shows that prices are squeezing into a range. Ranges can be followed by breakouts.

Second, it shows that RUT made a higher low in September versus August. This is noteworthy because the S&P 500 , Nasdaq-100 and Dow Jones Industrial Average all made lower lows this month. Higher lows and modest drops amid periods of volatility are signs of accumulation and relative strength .

Speaking of relative strength , this chart shows how RUT’s relative strength has improved since mid-September. (See our Smart Relative Strength script.)

Next, the small-cap index has been holding support at its rising 200-day simple moving average ( SMA ).

Finally, the macro backdrop may favor RUT as interest rates rise and investors pivot back toward cyclical reopening stocks. Traders may want to keep a close eye on this chart for a potential breakout if the broader market stabilizes.

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