Still Many Broken Charts Despite the Index Rallies; Russell 2000 Under Performing - Trader Mark

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Still Many Broken Charts Despite the Index Rallies; Russell 2000 Under Performing
Nov 04, 2009 04:45 PM UTC

Trader Mark

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Something that has been apparent lately is the weakness in small and mid caps, masked by the relative strength in large caps. We can see this in the indexes - while we've corrected some in both NASDAQ and S&P 500 it is nothing like what I am seeing on individual stocks. I don't often post a chart of the Russell 2000 which is a much broader index, combining S&P 500 type of companies with a good selection of mid cap and the larger stocks in the small cap universe but you can see what I am talking about in a picture. We're not even close to the 50 day moving average in this index - unlike NASDAQ and S&P 500.

As I scan through names of names we own, or of interest I see the same pattern. Now of course in the "student body left" trading environment - all it takes is a bludgeoning of the US dollar, and we can rally every stock in the universe up in 1 huge correlation trade so this can change in a heartbeat. But thus far, it hasn't. In fact... with a tight stop... these are the type of charts I like to go short, rather than go long .(EJ and ATHR look very appealing)

Here are some example of what I am speaking of just from the portfolio holdings - many more in my watch lists all in exact same pattern. This shows me that breadth stinks and its a narrow rally led by the 'go to' names than institutions love to flood into to, along with oversold bounces in smaller names. The larger cap preference has been the case 2 weeks previous to today as well; only last week did the larger names finally get hit.

Instead of that sort of action, from the long side we'd much rather see this:

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