Plunk! The Russell 2000 Is In Trouble

Yesterday we saw a run right back up to 1410 on the SPX cash market for what was likely the final failed attempt at breaching that level to the upside. The blathering herd has been telling me that small caps are still outperforming. I don't measure out performance using the same methodology as most because it leads to whipsawing too often. So, as I've stated, small caps have underperformed since May. Might I add, that's the first time since this bull market began that I can say this.

Now we are back below the May of 2006 small cap highs as defined by the Russell 2000. We've had this rally for what some would say is ten months. I'd say eight months but we are splitting hairs. Small caps as defined by the 2000 companies in the Russell have yet to deliver a positive gain in that period of time. All I heard during this past rally was how small caps were out performing and would continue to out perform. The return is actually negative now. The question remains: Is this a false breakout? As I have said before, the market is the great deceiver. If one doesn't understand that there are very sophisticated competitors in financial markets who want to take your money, you need to wake up. Just as every job entails competing in the market place for profits, so is the world of the professional investors and traders.