While small caps have been outperforming during the stock market recovery, it is also taking a harder hit during the 6/7 session when the market was slightly bearish. When looking at the Russell 2000 $RUT, we can see that today's bearish candle is an engulfing candle, which signals a period of consolidation ahead. Russell 2000(click to enlarge)Bulls to Retreat:- First of all, we should acknowledge the bullish trend that has been developing in RUT. - However, the RSI was above 70, which indicated overbought conditions. This is not a strong indicator for a bearish attempt when the prevailing uptrend is strong. Still, combined with the bearish engulfing candle, we should now pay more attention to a possible bearish correction.- I think there will be a consolidation period ahead for RUT, where we will see a bearish component.- However, I would limit that bearish outlook to the 1560 area. - We might even see strong buying from the previous support around 1615-1620, or at least the 1590-1600 area. - Also, I would anticipate the RSI to hold above 40, which would reflect maintenance of the prevailing bullish momentum.- While I am NOT bearish, I would not be bullish neither - hence the consolidation outlook. - Basically, we should expect some choppiness ahead with downside to 1560 and upside limited to 1680.