This page has been archived and commenting is disabled.

The Average Russell 2000 Stock Is Down 22% From Its Highs

Tyler Durden's picture




 

It’s hard to "fully commit" to this rally given "corroded internals," warns FBN Securities technical analyst JC O’Hara in note. As we previously noted, new highs are extremely negatively divergent from the index strength, as are smarket money flows, but what has O'Hara "very disturbed" is the fact that the average Russell 2000 stock is over 22% below its 52-week highs. As O'Hara notes, investors are ignoring "technical signals that have historically forewarned" of a drop; they’re "jumping onto a plane where only one of the two engines is working. The plane does not necessarily have to crash but the risk of an accident is much higher when the plane is not firing on all cylinders."

 

 

And as w enoted previously, the negative divergences are mounting...

Breadth is not at all supportive...

h/t Brad Wishak of NewEdge

 

"Smart money" Flow is decidely the wrong way...

 

As Louise Yamada notes,

S&P 500 emerges from 3-month symmetrical continuation pattern to set all-time high even as “fewer and fewer” stocks set new highs, which has “history of not boding well,” writes independent technical analyst Louise Yamada in June monthly note.

In addition, Piper Jaffray technical analyst Craig Johnson writes in note,

the drop in 10Y Treasury note yield “not a bullish sign for the economy” or stocks and divergence between rising Dow Jones Industrials and falling Russell 2000 Index of smalll cap stocks linked to higher volatility and “meaningful” corrections in years past.

 

Also notes “fading” relief rally in former high fliers SPLK, DATA, NOW, N, FEYE and negative summer seasonality during mid-term election years as reasons to expect drop in stocks

 

Sees correction taking S&P 500 down to 1,600-1,650, implies drop of as much as 17%

Still, there's always the non-economic indiscriminate buyer of last resort... the desperate to shrink their float and flatter EPS - corporate buybacks.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 06/03/2014 - 15:07 | 4820889 JenkinsLane
JenkinsLane's picture

So what you're saying is there's never been a better time to go long XIV right?

 

Great! I'm all in!

 

Tue, 06/03/2014 - 15:04 | 4820904 Dr. Engali
Dr. Engali's picture

The BernankenYellen needs to hang a mission accomplished sign for successfully popping the small cap bubble without smashing the broader market.

Tue, 06/03/2014 - 15:09 | 4820916 DarthVaderMentor
DarthVaderMentor's picture

I guess another 50% or so drop from this level isn't as "financially mortal"............

Tue, 06/03/2014 - 15:15 | 4820927 NoDebt
NoDebt's picture

They know if they had another 2008-style melt-down today it would be the widowmaker.  They'll never let it happen until they are incapable of preventing it from happening (or their private SWAT teams have another couple billion bullets).

Tue, 06/03/2014 - 15:05 | 4820906 dirtyfiles
dirtyfiles's picture

this are the momo ones the rest to follow soon

Tue, 06/03/2014 - 15:09 | 4820915 Everybodys All ...
Everybodys All American's picture

Apparently no russell 2000 companies are dumb enough to buy their own stock.

Tue, 06/03/2014 - 15:11 | 4820922 NoDebt
NoDebt's picture

Russell 2000 companies don't have any money to buy their own stock.  They're too busy trying to manage cashflow and meet payroll in this super-awesome recovery we're experiencing.  

Tue, 06/03/2014 - 15:21 | 4820940 Everybodys All ...
Everybodys All American's picture

True and no one is dumb enough to go out on the preverbial limb and buy a bond offering from them so these companies can turn around and buy their own stock with it unlike in the large caps.

Tue, 06/03/2014 - 15:12 | 4820917 AccreditedEYE
AccreditedEYE's picture

And what we're not told is that everybody mentioned above is leveraged long x3 while they sell you a story of Armageddon. Don't believe the hype. ZH and all the rest will try and sound the alarm but everybody knows equities only go up.

Tue, 06/03/2014 - 15:20 | 4820941 Winston Churchill
Winston Churchill's picture

I remeber hearing that in 1973,1986,1999 and 2007.

It is getting boring, and no,its not different this time.

Herd instict will overcome even Mr.Yellens put.

The herd always turns, just don't be in its path when it does.

Tue, 06/03/2014 - 15:11 | 4820920 Spastica Rex
Spastica Rex's picture

I'm really bored with analogies.

Tue, 06/03/2014 - 15:13 | 4820924 NoDebt
NoDebt's picture

I know.  It's like watching the same movie over and over again, expecting a different ending.

Oh..... sorry.

Tue, 06/03/2014 - 15:15 | 4820929 dontgoforit
dontgoforit's picture

Right.  And we know there's no ending to QE the Movie, Sequel I, II, etc....ad infinitum.

Tue, 06/03/2014 - 15:11 | 4820921 TheRideNeverEnds
TheRideNeverEnds's picture

Because people realized why should you speculate in risky RUT components when you can just outright buy JNJ, all it does is go up AND it pays a dividend.  

Tue, 06/03/2014 - 15:19 | 4820938 Unknown Poster
Unknown Poster's picture

With POMO propping stocks, and the fed saying it will end it makes sense to front-run the fed. The riskiest fall first. With smaller POMO, lower beta megacaps have been getting most of the flows. High betais on the back burner.

Tue, 06/03/2014 - 15:27 | 4820970 Remnant_Army
Remnant_Army's picture

Wednesday, July 10th, 2013 @ 15:41


"The lies you are being fed about your economy are designed to fool you  and strip you of what you own. Pray, pray, pray that I will stop those  who control your currencies from taking everything you own away from  you."

 

http://www.thewarningsecondcoming.com/god-the-father-the-lies-you-are-be...

Tue, 06/03/2014 - 15:32 | 4820985 orangegeek
orangegeek's picture

a bit too much hyperbole.  take a chill pill there poindexter!!

Tue, 06/03/2014 - 16:02 | 4821096 dontgoforit
dontgoforit's picture

ZH must be covered up in saints then because it seems to me ZH'ers are on to the lies and deceit.  No one gets out of this life alive, but how you go is the important part.  Christ is our Savior.  There is no one else.  The pursuit of monetary gain for its own sake is foolish; but men must work to earn, therefore to eat.

Tue, 06/03/2014 - 15:31 | 4820979 orangegeek
orangegeek's picture

Pressure is building.  Volume is smashed and heading to 1.

 

 

Tue, 06/03/2014 - 15:39 | 4821017 venturen
venturen's picture

what prevented useless market with wall street ramp next? Pig guts, companies starting with X, Name with only 3 letters, inverse yeild deafult pieces of crap? It is all smoke and mirrors....a couple more show trials, annouce Obama president for life, name that deserter POW treasury secretary and the farce will be complete

Tue, 06/03/2014 - 15:42 | 4821027 FieldingMellish
FieldingMellish's picture

3:30 pump taking things green. It is Tuesday, after all.

Tue, 06/03/2014 - 16:07 | 4821113 Jack Sheet
Jack Sheet's picture

Where would we be without technical analysis?

Tue, 06/03/2014 - 18:06 | 4821376 yogibear
yogibear's picture

William Dudley of the NY Fed says he'll fix that soon with a few clicks of his mouse at the Fed's NYSE trading desk.

Wed, 06/04/2014 - 01:15 | 4822304 Bunga Bunga
Bunga Bunga's picture

RUSSEL2000 P/E = 83.83, I would say that's a generational buy, nothing can go wrong here.

http://online.wsj.com/mdc/public/page/2_3021-peyield.html

Wed, 06/04/2014 - 03:57 | 4822396 oshe
oshe's picture

Maybe I am just really dumb, but if the AVERAGE stock is down 22% of it's highs, wouldn't the RUSSELL 2000 index also be 22% down from it's highs (which is 1183, so 1183x0.8=946).

I mean the RUSSELL 2000 is the average of all stocks value, so stocks going down on average, means index goes down. Stocks going up on average russell goes up.

There is always stocks that are up and down, it's the AVERAGE that does it. So how can the AVERAGE stock in the Russell 2000 be down 22%. 

PLEASE ENLIGHTEN ME..

Do NOT follow this link or you will be banned from the site!