We’ve now seen 83 consecutive trading days where the 3-month rolling fund flow for the Russell 2000 (IWM) has been negative — a stretch small caps haven’t experienced since mid-2019.
Here’s the chart:
Let's break down what the chart shows:
The green and red candlesticks in the top panel show the price of the Russell 2000.
The green and red line in the bottom panel shows the rolling 3-month net fund flows for the Russell 2000.
The Takeaway: Nobody wants small caps right now.
And that’s exactly why I’m watching them.
Negative flows for this long isn’t just rare — it’s a clear sign of bearish sentiment.
Historically, when flows dry up like this, it reflects a market that’s been abandoned… and often sets the stage for a reversal.
But it’s not just fund flows.
Short interest in small caps is near 18-month highs.
Traders are leaning heavily against the space — and that kind of crowding rarely ends quietly.
It has also been 899 days since IWM last reached an all-time high.
Despite all the negativity, IWM has just reclaimed a key short-term level and printed fresh 3-month highs, and is now only 11.6% below its all-time high from 2021.
It’s quietly improving while no one’s watching.
No one’s positioned for small caps.
No one’s talking about them.
But when expectations are this low… the upside surprise tends to hit the hardest.
Grant Hawkridge | Chief Aussie Operator, All Star Charts
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