Wednesday, June 01, 2011

Small Caps Lead The Decline In Today's Sell Off

Stocks were down sharply today after the release of some weak economic data which came out around 10:00am  early this morning. You'll notice lately that most of the economic reports that have been coming out  have been bearish.

In the above daily chart of the Russell2000 (IWM)  you can see that stocks clearly broke the uptrend line and retested this line yesterday. I was actually short this market and sat through the rally that we had over the past 5 trading days. The small caps were actually the strongest of the the major indices which made me uncomfortable so I lightened up on the position. Sure enough the small caps stocks were weakest out of the 4 major indices today.... go figure.

Based on momentum and the head and shoulders topping pattern, I am looking for further weakness for the overall stock market. The financials have been one of the weakest sectors which always is a sign that the market is not healthy.

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