Small Caps Are Struggling

The S&P 500 keeps hitting new highs, but the Russell 2000 small cap index hasn’t been so fortunate.

RUT has gone almost four months without a new record level. In contrast, the Dow Jones Industrial Average and Transports haven’t hit a new high in over two months. The S&P 500 and Nasdaq-100 hit new highs this week.

A few bearish patterns stand out on the small cap chart. First, notice the lack of bounce at the 50-day and 100-day simple moving averages (SMA). This is different from the earlier rebounds at those lines in May and June.

Next, the shorter time frame: RUT’s 8-day exponential moving average (EMA) crossed under the 21-day EMA last week and has remained below it.

Turning to the longer-term weekly chart, we see a bearish inside candle at the end of June. A red bar followed and now we’re in another down week:


It’s not totally bearish overall, but there are growing signs of weakness and poor relative strength. If the market has summer volatility, the sellers may begin their work in RUT.

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