Trend Signal Now: Regional Canaries

Friday, October 17, 2025

Welcome to The Strazza Letter, a free note with market insights from me, All Star Charts Chief Market Strategist Steve Strazza.

The Russell 2000 $IWM and Micro-Cap Index $IWC both printed new all-time highs earlier this week. That's a milestone that, at first glance, speaks to growing risk appetite and broadening market strength.

But a closer look under the hood tells a more complicated story.

Regional banks — the largest industry group in the Russell 2000 at little over 9% — just registered new 52-week relative lows versus the S&P 500.

SPDR Regional Bank Index $KRE is down over 10% from its recent highs, and just suffered one of its worst sessions in recent history.

This is happening at the same time small caps are trending higher and attempting to breakout out of a multi-year base.

We don't want to make the bet that small caps stick this historic breakout if banks are collapsing.

Biotech, technology, and industrials have been doing the heavy lifting off the April low, but the largest industry group in the index is not only sitting out the rally but actively dragging on it.

So, will small caps book this breakout?

Or will these new highs fail?

If the regionals can't find their footing soon, it's hard to see the Russell resolving higher at this critical level.

We talked all about the banks this morning on our new show, The Open Bar. We even discussed how to short this potential failed breakout in the Russell 2000.

Click here to watch the replay.

Enjoy your weekend.

Steve.

Steve Strazza | Chief Market Strategist, All Star Charts

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