Russell Closes Below 50 DMA, Bad Breadth, Interest Rates Still Look Higher, The Crowd Believes

For the first time in 96 sessions, according to Sentimentrader, the Russell 2000 (IWM) closed below its 50 DMA. This is important because the Russell has been leading this market higher, outperforming other benchmarks, since the beginning of November 2020. 

As Sam McCallum rightly asks: If the Russell stops leading what’s left to take its place?

For most of this bull market, the leader has been Tech but it is far from having repaired the technical damage sustained in the correction starting in mid-February. For example, take a look at the charts of the (QQQ), which I use as a proxy for what I call Mega Cap Tech, and (ARKK), which I use as a proxy for what I call Speculative Tech.

Hence McCallum’s question and the interpretation I’ve been giving here: Reopen Value, for which I use the IWM (the Russell 2000 ETF) as a proxy, is the last pillar of this bull market. If it is topping, the bull has nothing left to stand on.

On the surface, yesterday wasn’t too bad with the S&P -0.76%, the NASDAQ -1.12% and the Russell -3.58%. However, because the Russell was so weak breadth was quite bad with NYSE + NASDAQ Advancers to Decliners of 1294 to 6183. In other words, for every stock that rose yesterday, five fell. Only a small number of mega cap names held the market together.

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