What a small-cap ‘breakout’ means for the broader stock market into 2020

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Small-cap stocks have been a missing piece of the puzzle as the stock market roared back in 2019 from a fourth-quarter drop last year that saw the S&P 500 (SPX) come within a whisker of a 20% pullback, the widely used definition of a bear market. This week, the small-cap Russell 2000 (RUT) which did fall into a bear market during last year’s rout, posted a potential breakout, hitting its first 52-week high in 15 months on Monday and extending gains so far this week. “The inability for the Russell 2000 to break out was one of the concerning signs present over the past couple of weeks (notice small-caps hadn’t been doing much for most of November), but now that has resolved itself and should be bullish for the broad market,” said Andrew Adams, analyst at Saut Strategy, in a Wednesday note.

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