Alarm bells ring over small caps


"We are getting increasingly concerned about the extended nature of small-caps," writes MKM's Jonathan Krinsky, noting the Russell 2000 as of last week closed 42% above its 200-day moving average, the most in four years. A check of the records over the last 30 years when the Russell's been more than 40% above its 200-day finds forward returns 90 days out to be negative 94% of the time, with an average decline of 7%.

He notes biotech makes up about 5% of the Russell 2000 and that sector's rally seems particularly unsustainable.

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Comments (7)
  • seterk
    , contributor
    Comments (290) | Send Message
     
    Have SLYG, thinking of taking a little off the top. I noticed Kate Spade is now their largest holding. Thoughts on this stock and ETF?
    10 Mar 2014, 03:57 PM Reply Like
  • bcbcbc
    , contributor
    Comment (1) | Send Message
     
    Nice point.
    Just wondering, how many occurrences over the last thirty years has the Russell 2000 been more than 40% over its 200 day MA?
    10 Mar 2014, 04:37 PM Reply Like
  • artcomo
    , contributor
    Comments (4) | Send Message
     
    It looks more like 15% above its moving average to me!
    10 Mar 2014, 04:38 PM Reply Like
  • artcomo
    , contributor
    Comments (4) | Send Message
     
    IWM appears to be 15% above its 200 day, not 42% - high but not threatening.
    10 Mar 2014, 04:38 PM Reply Like
  • Rich444499
    , contributor
    Comment (1) | Send Message
     
    I come up with 11%. 119.30 minus 107.05 (200 day moving average) = 12.25/107.5= 11.40%????????
    10 Mar 2014, 08:41 PM Reply Like
  • artcomo
    , contributor
    Comments (4) | Send Message
     
    You're right Rich. Picking the "friendliest" 200 day stretch, I came up with 12.5%. My 15% was quick and inaccurate.
    11 Mar 2014, 09:42 AM Reply Like
  • OSCARMON
    , contributor
    Comments (7) | Send Message
     
    IT's the the 200 DMA people! it's the 200 WMA!
    11 Mar 2014, 10:58 AM Reply Like
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