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.