Small caps and Dow diverge

|By:, SA News Editor

Yesterday was the first session in more than three years which saw the Dow (DIA) decline while the Russell 2000 (IWM) rose more than 1.5%, according to Bespoke.

Bullish or bearish? Small cap outperformance is commonly thought to signal the sort risk-appetite necessary for a bull market. The Russell 2000 has outperformed the Dow by nearly 1000 basis points over the last year with all of the gain coming since the bull move took off in mid-November.

Small caps really started to widen their lead from late June - perhaps signaling the sort of over-exuberance necessary to set at least a temporary market top.

Small cap ETFs: IWM, VTWO, EWRS, SRTY, TWM, RWM, TNA, URTY, UWM, TZA, SMLV, TWOK.

Dow ETFs: DIA, DDM, UDOW, DXD, SDOW, DOG.