Alarm bells ring over small caps

|By:, SA News Editor

"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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