Small caps finally woke up — now they're testing traders again: Chart of the Day
Small caps spent six years going sideways before finally breaking out. Now the iShares Russell 2000 ETF (IWM) is bouncing off the first level bulls need to defend. That level is roughly $270. It capped the small-cap rally in January, turned into support once already in April, and is now getting tested again after IWM pulled back from its May 6 all-time closing high. Small caps are testing a floor that used to be a ceiling · Yahoo Finance AlphaSpace That is textbook breakout behavior — if buyers continue to show up. Markets rarely move in straight lines, and breakouts are not confirmed just because a price clears an old high. The more useful test comes later, when the old ceiling gets revisited and traders decide whether it has become the new floor. The small-cap retest also has some weight behind it. Since the March 30 market low, IWM has been running roughly neck and neck with the SPDR S&P 500 ETF (SPY), a notable change for a group that spent years frustrating investors while large-cap tech did the heavy lifting. Trader Evan Medeiros flagged the Russell 2000 setup this week after three straight down days put small caps back near their late-April pivot. But the monthly chart is the bigger tell. IWM did not just break above a random short-term level. It finally pushed out of a long trading range that stretched from 2020 through 2025. For years, small caps rallied, stalled, reversed, and did it all over again. Breakout buyers had plenty of chances to get excited — and plenty of chances to regret it. Small caps recently broke out of a long-term sideways trading range · Yahoo Finance AlphaSpace That makes the $240–$245 zone the real line on a deeper pullback. It roughly captures the 2021 and 2024 highs, the old multiyear ceiling that IWM finally cleared, and the area that helped support the April lows. So there are two floors to watch, not one. Above $270, small caps keep their short-term momentum. Below it, the bigger question is whether the old six-year ceiling near $240–$245 still holds. Lose that, and the breakout that started in late 2025 looks like another head fake. Jared Blikre is the global markets and data editor for Yahoo Finance. Follow him on X at @SPYJared or email him at jaredblikre@yahooinc.com. Click here for in-depth analysis of the latest stock market news and events moving stock prices Read the latest financial and business news from Yahoo Finance
