The S&P 500, the large cap index, is widely followed as a measure of the health of the U. S. economy. The NASDAQ-100 is widely followed as a measure mainly of the big tech and social media stocks that make up the index. The Russell 2000 ETF is seen as a way of gauging the economic health (or pain) of the small cap universe.
None of these three indexes this week is giving strong signals of continued growth. The S&P 500 today is unable to make it back above last week’s new high after Monday’s big gap down. The NASDAQ-100 last week failed to make a new high, diverging negatively from the S&P 500.
The Russell 2000 ETF which contains smaller capitalized stocks seems to be struggling to even go up again
The S&P 500, NASDAQ-100 and Russell 2000 price charts
The S&P 500 annotated daily price chart:
Mondays gap down and the subsequent Tuesday and Wednesday sessions are red circled. After dipping below the 50-day moving average on Monday, the price regained strength on Tuesday, and put in an “inside day” on Wednesday — no higher and no lower than the previous session.
The S&P 500 annotated weekly price chart:
A price chart that’s hard to complain about: the price is well above the up trending 50-day moving average and well, well above the up trending 200-day moving average. It’s almost too good to be true. Note that the relative strength indicator (RSI, below the price chart) is diverging negatively from the direction of price.
The NASDAQ-100 annotated daily price chart:
After gapping down on Monday, the stock on Tuesday recovered but could not quite fill the gap. Today is an “inside day,” meaning that the price could not rise above yesterday’s trading range and did not trade below it. Possible translation: investors are thinking about it. Note that it’s now two closes above the 50-day moving average.
The NASDAQ-100 annotated weekly price chart:
It’s hard to complain when the 50-day moving average continues to trend upward and when the 200-day moving average does the same. One problem: this index did not make a new high this month while the S&P 500 made it there. A negative divergence of this kind might be a problem.
The iShares Russell 2000 ETF annotated daily price chart:
For seven sessions straight, the small cap index has failed to make it back above the 50-day moving average, which is now in down trend mode. The early January low, a test of the up trending 200-day moving average, may be tested again if this index can’t get going to the upside.
The iShares Russell 2000 ETF annotated weekly price chart:
The small cap fund remains above an up trending 50-day moving average and well above a sideways 200-day moving average. The lack of a new high — or anywhere close to it — at a time when the S&P 500 achieved one is concerning. This kind of underperformance is not what could be called bullish.
More analysis and commentary at johnnavin.substack.com.
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