Small-cap stocks are 45 to 55% of the overall market. The Russell 2000 gives us a barometer of how the small-cap stocks are performing. Yet again, we are looking at a chart that is approaching some potentially significant resistance. Here we have the 50 day moving average and 61.8% Fib retracement sitting just overhead with the upper median line of the Andrews pitchfork looming only a little bit higher.
In other recent pullbacks we have seen divergence between the NASDAQ and other indexes – first the NASDAQ dropped while the S&P 500 and Dow stayed relatively strong – then we saw the Dow and S&P 500 pullback while the NASDAQ remained strong. This week all three of the headline indexes declined together and did so with gusto.
Ongoing strength in the US Dollar doesn’t bode well for Gold. And, as we have mentioned before, there are national and private entities (central banks, sovereign wealth funds, hedge funds, investment banks, etc.) with the firepower to push the markets around to some extent. It is likely that there are numerous stops sitting below the double-bottom and running stops is one of the ways that these big traders make serious money. Don’t be surprised to see the double-bottom fail or to see price head quickly lower as the stops are run and capitulation selling kicks in.