Vladimir ZakharovChannel Introduction
prologue
Small-cap ETFs have always been in the spotlight, whether in a bull or bear market. These companies are small enough that they can generate large profits, sometimes even growing to over 100 times their original value.But the possibility Especially during a recession there is a big risk. In times like these, such companies may decline by more than 50% or even cease to exist.
In this article, I share my take on the Russell 2000 via proxy ETFs.
VTWO; Russell 2000 Proxy
Vanguard Russell 2000 Index Fund ETF (Nasdaq: VTWO) tracks the US Russell 2000 Small Cap Index. Here is what is configured:
Structure of the VTWO ETF
Sector composition
VTWO ETF Sector Exposure (VTWO ETF website, author analysis)
Unlike large-cap indices such as the S&P 500 (SPY), technology and healthcare account for 42% of total exposure, while exposure to VTWO’s top two sectors is more asset-heavy, such as financials and industrials. in many industries. These two sectors account for 34.1% of total exposure. The sector mix here is consistent with similar small-cap ETFs I’ve analyzed, such as the IWO.
Top 5 holdings
Top 5 VTWO ETFs (VTWO ETF website, author analysis)
In terms of top 5 holdings, VTWO is very diverse. The top 5 stocks contribute just 1.5% to the index. The top five holders are ShockWave Medical Inc (SWAV), Halozyme Therapeutics Inc (HALO), EMCOR Group Inc (EME), Matador Resources Co (MTDR) and Karuna Therapeutics Inc (KRTX).
VTWO ETF’s Leading Fundamental Tracker
degree of interest
As I explained in my article on small caps, the Fed is not keen on slowing rate hikes. The Fed wants to see “substantially more evidence” before changing its stance on rate hikes.
Rising interest rates will negatively impact small-cap stocks not only by increasing the cost of capital, but also by increasing the cost of borrowing. In addition, small-cap business models tend to be less resilient, increasing the risk of financial leverage.
Future developments on the Federal Reserve’s moves are an important factor that can be monitored here.
recession
Small-caps tend to be more sensitive to changing economic conditions than larger, established companies, as they may have fewer resources to weather a recession. The consensus sentiment is that a recession is imminent.
I think recession is a buzzword right now.it is more useful to ask yourself specific question Our outlook for inflation, unemployment, federal funds and moreEights, DXY, aSecond GDP growth rate. This helps reveal the true expectations and impact of an economic slowdown. Therefore, we also track these underlying economic indicators.
Let’s move on to technology:
If you are new to hunting alpha articles using technical analysis, I encourage you to read this post where I explain how and why I read charts using the principles of flow, location and traps. To do.
Read relative money flow
VTWO vs SPX500 Technical Analysis (TradingView, author analysis)
My reading of relative money flow indicates that there is probably some movement within the predictable range before finally deciding to drop again. A sharp backlash is seen from the area. The pair has fallen 35% from its 2018 high before recovering. No clear false breakouts are observed on either side to confirm a bullish or bearish trigger bias.
read absolute money flow
VTWO Technical Analysis (TradingView, author analysis)
On a standalone basis, the VTWO ETF remains bearish after suffering rejection from the $76 monthly resistance. As for the price, he has risen to the top after many failures in 2020-21, but has not been able to sustain above $95. Buyers found him trapped in the $75-80 zone, leading to a price correction. The price has tried to find support in the $68-70 zone and even pulled back, but signs of sustaining those levels are low. We expect a sharp decline from this zone and a sharp acceleration to $60.54 once the $65 monthly support breaks.
overview
All in all, I haven’t read VTWO clearly. I’m taking a ‘hold’ stance on his VTWO vs S&P 500, but a bearish stance on his VTWO chart in standalone. Usually I like to check the directional adjustments on both an absolute and standalone basis before taking a position. So, for more clarity, we track the aforementioned economic release. I’m putting this on hold for now.
