Small-cap stocks have outperformed large-cap stocks since early August 2025, with the Russell 2000 index ($IWM) rising approximately 8.5% since reaching a golden cross and up 5% over the past two days. This marks the best two-day relative rally of small caps versus the S&P 500 ($SPY) since November 2024, with $IWM up 31.9% since the April 8 low compared to $SPY's 29.7% gain. Small-cap value stocks have led this rally, which is characterized by a notable factor rotation and a breakout above key technical levels, including a one-year point of control (POC) and the 230 level on the Russell 2000. The rally has been accompanied by a large net short position in Russell 2000 futures held by hedge funds and large speculators, reaching levels last seen during the 2022 bear market, contributing to a potential short squeeze. Meanwhile, net short positions on S&P 500 futures have slightly decreased but remain elevated. Market analysts note that this small-cap strength is reminiscent of previous post-election and mid-April rallies, suggesting ongoing momentum in this segment of the market.