Small-caps correcting through time

The small-cap Russell 2000 remains stuck in a trading range but many of its members have been falling off. Over the past 20 days, an average of fewer than 33% of small-cap stocks have held above their 50-day moving averages.

Scenarios like this always raise the question of whether the index will catch down to the average stock, or whether the average stock will catch up to the index. For this particular situation, it has been much more the latter. Only once, in 2011, did this kind of signal precede a big drawdown in the Russell 2000.