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If it's a healthy sign when small caps (IWM) lead large caps (SPY) during a rally, then the...

If it's a healthy sign when small caps (IWM) lead large caps (SPY) during a rally, then the recent move higher should come with a warning. Small caps failed to take out their July 19 high and instead made a series of lower highs that month, writes Joe Bell. Actually, the S&P outperformance has been going on for longer than 4 weeks.
Comments (5)
  • The small caps have moved into a bear alignment, the 50 day has moved below the 200 day moving average, aka the death cross!

     

    But the small caps and the Financials tend to move first out of the gate to the upside and then conversely they also tend to show weakness to the downside before the rest of the broader market.
    The charts are showing mega weakness and risk is clearly to the downside!

     

    Then to put a point on all this, look at the monthly or weekly charts. There is nothing to get bullish about here.

     

    If you want to put hope into some "Possible Outcome" here's one I would look for,
    a massive whoosh to the downside. As the markets become convinced Obama will be a one term disaster, then as the election nears and a Romney presidency looks possible you could get a snap back rally.
    But no matter what happens, even with a rally within the bear move, we are going to ring in 2013 with a nasty bear market fully engaged and there is nothing short of TIME to cure the ills of this mega deleveraging cycle we are mired in.

     

    Greenspan and Bernanke have been the two worst "Central Planners" in the republic's history!
    Add in Tax cheat Timmy and the communist antics of our commander and chief and it will be amazing if the REPUBLIC survives!

     

    May the good lord watch over this fragile little experiment in freedom / mans self rule we lovingly call America,

     

    God save the republic!
    2 Aug 2012, 04:18 PM Reply Like
  • I agree with your sentiments completely, however, the 50 dma on the Russell 2000 ($RUT) at 778.19 is still above the 200 dma at 777.42, although just barely. Maybe Friday we'll get the death cross.
    3 Aug 2012, 04:42 AM Reply Like
  • Amen to all that, @ids
    9 Aug 2012, 01:28 PM Reply Like
  • I trade the URTY and the SRTY using the RUT and the RWM (5) DMA for signals with a chart where one candlestick represents one day.
    2 Aug 2012, 07:18 PM Reply Like
  • A lot of bearish sentiment on IWM is good for this ETF. I believe that on Friday (8/4) we saw an unmistakable upside reversal of IWM. It's possible that we will see consolidation phase on Monday but IWM is clearly headed to break 80 soon. During this time SPY may still outperform IWM but eventually IWM will rise to catch up. We saw this type of pattern in IWM in many previous years.
    5 Aug 2012, 02:40 PM Reply Like
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