Russell Divergence: A look at the numbers

• Posted by admin
• on September 20th, 2011

We’ve been writing about the divergence between the Russell and the Nasdaq for a while now but wanted to put out a few figures out there:

The $QQQ is 2.19% over its 50SMA

The $SPY is 1.96%  under its 50SMA

The $IWM is 5.96% under its 50SMA

 

Here’s an update of the chart we posted yesterday showing divergence between the Nasdaq and the Russell:

 

We have no idea what’s going on — is this some new paradigm in which small-cap stocks, financials, coals, oil stocks, and copper all sit dead in the water while momentum “decouples”?    We don’t think so.   One will soon revert to the other  — that is either the laggards start to stabilize or the momentum stocks will start to fade.     We’ve been through markets where tech/momo take the lead and commodities/more conservative sectors grundgingly follow but we can’t remember a time where copper (fresh new year lows again today) was an inverse indicator for the market.

For short-term traders it’s business as usual (we had six successful momentum daytrade alerts from our newsletter trigger in last two days) but it has been keeping us even more short-term than usual, constantly worrying about sudden reversals and death traps.

Anomalies indeed.

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