Small caps pushing it in this environmentUS Small Cap 2000 CFDFOREXCOM:US2000FOREXcomYou’ve got gasoline prices surging, Treasury yields pushing back towards prior highs, and STIR markets starting to price the risk of hikes from the Fed rather than cuts, yet US small caps are still sitting within cooee of record highs. Earnings have held up, as they usually do relative to modest expectations, but for small caps the question is how long they can continue to ignore what is an increasingly unfriendly macro backdrop. These are companies far more exposed to the domestic cycle and far more reliant on external funding than larger companies. At some point, that matters. After repeated failures to break and hold above 2800 over the past fortnight, our Russell 2000 contract looks heavy. Should the price remain beneath the prior record high of 2737 set in January this year, it can be used to build short setups around, allowing for entry beneath with a stop above for protection, targeting the uptrend running from the Liberation Day lows initially and, beyond that, the confluence of the 50 and 100-day moving averages, located today at 2608. Given the remarkably resilient price action all things considered, some may prefer to hold off on entry until a clean break beneath the Liberation Day uptrend, given its proximity, should the unwind extend further. Like the soggy price action, the oscillators are also rolling over, providing an early warning signal to bulls. RSI (14) has turned sharply lower after hitting overbought territory earlier this month, shifting back towards the neutral 50 level. MACD has also crossed the signal line from above and is rolling over, strengthening the cautious message. The price looks heavy, momentum is shifting, and the macro backdrop is anything but peachy. The ducks look to be lining up, but it’s up to the price action to confirm. Good luck! DS