Huge upside momentum at the start of the week tapered off into a slow stall as the indexes suffered from a bit of the old syndrome.of too far, too fast. The NASDAQ Composite Index came in Monday with a big breakaway gap to all-time highs, and the momentum from that move carried it up through the milestone 6,000 level on Tuesday (I did not, however, see anyone wearing NASDAQ 6000 baseball caps to commemorate the occasion).
The upside mo-mo continued into Friday morning as the index gapped up again to an all-time high. Running into heavy volume selling that may have been at least partly due to month-end activity the NASDAQ gave up a strong opening gain to close in the red for the day.
The small-cap Russell 2000 Index was hit the hardest on Friday’s reversal off the highs, closing down -1.18% on the day. The daily chart of the Russell’s proxy, the iShares Russell 2000 ETF (IWM), broke back below Tuesday’s breakout point on higher volume. As I wrote on Wednesday, the Russell’s action could only be interpreted bearishly if we saw the breakout failure. We saw that on Friday. Therefore, near-term the action among small-caps is bearish, and may imply a further pullback from here.
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