General’s leading, but where are the troops?

One gauge of the health of the market is to track how the majority of stocks are trending. So far in 2014 the large-cap S&P 500 has racked up record high after record high, but the small-cap Russell 2000 isn’t following suit. Year-to-date the Russell 2000 (“troops”) is in negative territory while the S&P 500 (“general”) is up 8.2%. Stock market leadership is narrowing – a potential red flag.

This interesting graph from Chart of the Day shows the performance of the Russell 2000 Index going back to 2002. The red line represents overhead resistance, while the green line is support. Taking this longer term perspective, the Russell 2000 is sitting at an important inflection point.

♦ Please note that my readings will change without notice,  so please don’t buy or sell solely based on anything you read in this blog. ♦

What bull market?

With about 30 minutes until Wall Street’s closing bell rings the Dow is up triple digits and thisclose to notching its first record close since July 16.  The S&P 500 is trading right around 2000 and within a fraction of a percentage point of its own historic high. Yet a whopping 47% of stocks that make up the tech-heavy Nasdaq Composite Index are sitting 20% or more below their 52-week highs. Plus, last week the small-cap Russell 2000 Index moved under both its 50-day (intermediate trend) and 200-day (long-term trend) simple moving averages.

♦ Please note that my readings will change without notice,  so please don’t buy or sell solely based on anything you read in this blog. ♦

Changing of the guard?

The small-cap Russell 2000 Index lost ground Monday and Tuesday, while the large-cap Dow Industrial Average and S&P 500 Index notched fresh highs. Two days don’t make a trend, but I’m keeping a close eye on this price action.

Continued weakness in the Russell 2000 could be signaling a flight-to-quality by traders unnerved by Cyprus’ financial crisis and North Korea’s saber-rattling. Or it might indicate this four-year old bull market is aging – historically small-caps lead the charge out of recession and as the economy improves, large-caps assume the leadership role.

For now, my Russell 2000 reading: Bull market.

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Please note that my readings will change without notice,  so please don’t buy or sell solely based on anything you read in this blog.