Market Montage

I wrote last week that eventually this divergence between the small caps and large caps had to close.  Either the large caps came down to perform more like the small caps, or vice versa.  Today it is the former.  Finally with Apple taking a break, the NASDAQ and S&P 500 are underperforming the Russell 2000.  We still don't have a -1% day on the year for the S&P 500 but at this moment the NASDAQ is testing that level.  Both have broken the 10 day moving average intraday (which they did about a month ago) but sit above the 20 day. …

The current market can definitely be described as divergent.  Apple (AAPL) and its 10%+ weighting in the NASDAQ (and much larger weighting on the very popular QQQ ETF) is keeping that index in seventh heaven.  A host of larger caps seem to be keeping the DJIA and S&P 500 in good shape as well… even as the Russell 2000 has cleanly broken down below the 20 day.  We have been harping on this divergence for weeks and highlighted the break late last week – I see it in quite a few financial media outlets and the general stock market blogosphere today.  …

I keep speaking about this divergence because it is quite amazing in (a) how long it has persisted and specifically to today (b) the ratio.  Usually we've seen about a 0.5 to 0.7% spread between the S&P 500 and Russell 2000 as they have been moving thru February.  Usually it's about a 2.5:1 ratio or maybe a bit more i.e. S&P 500 down 0.3%, Russell 2000 down 0.65+%.  As I type this the Russell 2000 is down 1.85% versus the S&P 500's 0.5% – that is almost 4 to 1.  A tale of two markets continues.  The S&P 500 is holding at its 10 day moving average where the dip buyers have had a buying orgy all year.

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