Why Is There Weakness in Small and Mid-Caps?

Something that has been apparent lately is the weakness in small and mid-caps, masked by the relative strength in large caps. We can see this in the indexes; while we've corrected some in both NASDAQ and S&P 500, it is nothing like what I am seeing in individual stocks. I don't often post a chart of the Russell 2000 which is a much broader index, combining S&P 500 type of companies with a good selection of mid-cap and the larger stocks in the small-cap universe, but you can see what I am talking about in a picture. We're not even close to the 50 day moving average in this index - unlike NASDAQ and S&P 500.

As I scan through names of names we own, or of interest, I see the same pattern. Now of course in the "student body left" trading environment - all it takes is a bludgeoning of the U.S. dollar, and we can rally every stock in the universe up in one huge correlation trade, so this can change in a heartbeat. But thus far, it hasn't. In fact... with a tight stop... these are the type of charts I like to go short, rather than go long (EJ and ATHR look very appealing)

Here are some examples of what I am speaking of just from the portfolio holdings - many more in my watch lists have the exact same pattern. This shows me that breadth stinks and its a narrow rally led by the 'go to' names than institutions love to flood in to, along with oversold bounces in smaller names. The larger cap preference has been the case two weeks ago as well; only last week did the larger names finally get hit.

Instead of that sort of action, from the long side we'd much rather see this:

Disclosure: I own shares in DFS, GFA, ATHR, CISG and EJ