Michele Schneider | Jul 27, 2021 12:28AM ET
Three of the four major indices, including the S&P 500 (SPY), NASDAQ 100 (QQQ), and the Dow Jones (DIA) inched to new highs, while the Russell 2000 (IWM) struggled in its current price range.
It is important for IWM to keep pace with the other indices, for it shows a large selection of small-cap companies which tend to better reflect the overall market picture. This is especially true throughout the pandemic which has seen smaller businesses struggle more while larger time-tested businesses had the capital to weather the pandemic.
Additionally, If IWM continues to chop within its current price area, we could be seeing a divergence between large-cap and small-cap companies.
Above is a chart of the 4 major indices with our proprietary Real Motion indicator.
The recent rally to new highs has pushed SPY and QQQ close to their 200-period moving average (green line) while IWM has yet to clear over its 50-PMA (blue line).
One interesting thing to note is how the DIA cleared to new highs along with QQQ and SPY in price, but has yet to clear over its 50-PMA like IWM. This could be showing that this recent push to new highs is losing momentum.
With that said, If the other major indices continue upwards without IWM, this could show there’s an underlying problem in the market, and we should be cautious. Especially if IWM cannot clear its 50-PMA on Real Motion.
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