In recent months, I have highlighted the importance of the Russell 2000, the benchmark index for small and mid-sized companies in the United States. While the Nasdaq, S&P 500 and Dow Jones Industrial They have already managed to return to the levels reached in 2021 -what I called a ace poker– The Russell 2000 Index remains a laggard, with potential for a 7% upside toward these all-time highs in 2021. Does anyone doubt it won’t hit them? I don’t know.
To complete the poker aces We need the Russell 2000 to break through this barrier, and this 7% rise is what fuels my optimism. My recommendation so far has been to trust the strong underlying uptrend, taking advantage of the declines seen in September and August to buy. I continue to emphasize that there will be no cause for concern until key supports are lost, such as the September lows (which I called the yellow line) and the higher August low (red line). However, I want to add a new level to watch in the short term: October lows will be the new yellow linethose of September will become the orange lineand those of August will retain their status of red line.
We will only see short-term weakness and buying exhaustion if the indices lose these lines. On the operational level, the strategy that I propose is to do what I call accordion with exposure, i.e. increase as prices continue to rise and reduce it as these supports give way. In the meantime, my intention is to maintain high exposure to the stock market until the Russell 2000 index reaches its 2021 highs. Once this goal is achieved, I consider it will be a good time to cash in partial profits , especially in companies that have done so. has seen vertical increases in recent weeks.
In my opinion, the year could be mostly over once the Russell 2000 hits these levels, which could coincide with the end of the US presidential elections. This process has brought the stock markets into a phase of calm and tranquility, but we must not forget that this state will not last forever.
When looking for opportunities, it is worth noting that in recent weeks there have been precisely North American small and mid-caps are a delight for investors. This has benefited a number of disruptive companies that I have been pointing out for the past month and a half in my analyses, the same ones that I used to build a 25-year portfolio for my children.
