The Russell 2000 (IWM) index of small-cap stocks is nearing a correction defined as a 10% decline from recent highs.
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The Russell 2000 briefly entered a correction in recent days after dropping 10% from its 52-week high of 2,449.86 achieved in late November of last year. However, the index comprised of stocks with market capitalizations of less than $5 billion rebounded 2% on January 15 amid a broader rally in equities after U.S. inflation came in lower than expected.
Still, analysts see worrying signs in the Russell 2000. The index is close to falling below its 200-day moving average of 2,166.80, according to market data. The index hasn’t finished trading below its 200-day moving average since November 30, 2023.
Leading stocks in the Russell 2000 include Sprouts Farmers Market (SFM), Mueller Industries (MLI), and IonQ (IONQ).
Worrying Signs
The index has managed to close above its 200-day moving average for nearly 280 consecutive trading days, marking the longest such stretch since 2017. Should the Russell 2000 finish trading below its 200-day moving average, it would represent a major breakdown for the index.
In the past, whenever the Russell 2000 has broken down below its 200-day moving average, the index has declined 2% the following month. Despite some short bursts of activity, small-cap stocks continue to underperform large caps in the current market.
Is the iShares Russell 2000 ETF a Buy?
The iShares Russell 2000 ETF has a consensus Hold rating among 3,897 Wall Street analysts. That rating is based on 2,515 Buy, 1,276 Hold, and 106 Sell recommendations issued in the past three months. The average IWM price target of $328.21 implies 47% upside from current levels.
