Small caps paint scary technical picture


Making the rounds across trading desks is this chart showing the Russell 2000 (IWM -1%) this week closing below its 200-day moving average for the first time since November 2012.

BAML's Macneil Curry adds a couple of additional technical ideas, noting Tuesdays this year have typically been positive, but not this week, and the Russell 2000 looks to be completing a 4-month head-and-shoulders top.

The small cap index is now off 5.3% YTD vs. a 1.6% gain for the S&P 500. It's also now fallen below the S&P on a Y/Y basis, up 13.3% vs. the big cap's 14.9% gain.

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Comments (9)
  • davidshelton
    , contributor
    Comments (343) | Send Message
     
    Boom!
    8 May 2014, 03:39 PM Reply Like
  • ceristeare
    , contributor
    Comments (978) | Send Message
     
    Did your head just explode? RUA (Russell 3000) looks fine.
    8 May 2014, 04:50 PM Reply Like
  • davidshelton
    , contributor
    Comments (343) | Send Message
     
    http://bit.ly/1jFFGhP
    8 May 2014, 05:12 PM Reply Like
  • ceristeare
    , contributor
    Comments (978) | Send Message
     
    haha very helpful. Bought a big chunk of Europe last year.
    8 May 2014, 05:45 PM Reply Like
  • davidshelton
    , contributor
    Comments (343) | Send Message
     
    No but seriously look at market internals and intermarket relationships. They don't look as pretty as the indices as upward momentum fades....
    9 May 2014, 01:16 PM Reply Like
  • ThetaDecay
    , contributor
    Comments (103) | Send Message
     
    A similar head-and-shoulders pattern is being formed in the Nasdaq.
    8 May 2014, 03:40 PM Reply Like
  • Brian McMorris
    , contributor
    Comments (1168) | Send Message
     
    What is the downside target for IWM? Any ideas?

     

    I have been playing the short side through SRTY. It is an exciting ride. I get in and out within a few days. I just missed my latest buy price today ($43.95). It got down to low $44s and then bounced back to $47.11. If IWM is going to break $100, I need to know!
    8 May 2014, 06:13 PM Reply Like
  • bobdark
    , contributor
    Comments (261) | Send Message
     
    IWM About to enter the fast track down to 97.5 (10% drop - first target for H&S decline) and NASDAQ looks poised to follow the same pattern and other indexes to suffer collateral damage. Defensive stocks down today along with Russel and NasDaq while Dow up, so the defensive rotation play is ending.
    I expect a macro trigger in next couple of days to fire off the technical move. Full-scale war in Ukraine seems the most likely trigger with the market damage arising from escalating sanctions/counter-sanc... between US and Russia elevating commodity prices and stressing global economy. Watch out for cascading effects on Europe that could make the decline even larger and more prolonged before any meaningful bounce. Low VIX shows market has not priced in any meaningful correction.
    8 May 2014, 11:33 PM Reply Like
  • rcpatrick5443
    , contributor
    Comments (837) | Send Message
     
    "technical ideas, noting Tuesdays this year have typically been positive, but not this week"

     

    You consider the coincidence that the market is sometimes up on Tuesdays a "technical idea"?
    9 May 2014, 12:34 AM Reply Like
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