When it comes to monthly momentum, it can take a while to become heavily over bought or over sold. The Russell 2000's monthly momentum reached lofty levels back in 1998 and 2007. Once momentum support broke at (1) and (2) in the Russell, it experienced declines ranging from 23% to 53%.
One has taken place before strong bull markets. When monthly momentum reached oversold levels back in 2003 and 2009, strong rallies took place.
Near Resistance
The rally off the 2009 lows, now, has monthly momentum higher than it was in 2007 and near the 1998 levels. Recently, momentum has turned down and is breaking support as the Russell nears a 14-year resistance line.
When lofty monthly momentum broke support in the past, small caps struggled to gain upward progress. Is a slippery slope ahead for small caps? Will it be different this time? Stay tuned as this could be an important juncture for small caps.