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IWM not pointing the way down

The iShares Russell 2000 Index ETF (IWM) is once again below its 200-day moving average. This is the sixth time this has happened since 2004. To make matters worse, there has been a TradeRadar SELL signal generated on IWM. Other major averages and their corresponding ETFs have also fallen though not quite so far.

Should we be worried?

Currently, IWM is only about 1.3% below its 200-day MA. None of the other major averages or their corresponding ETFs are below their 200-day MA. Things look shaky but we are not getting a serious bearish confirmation from the other indexes.

This looks like more of a confirmation of what some analysts have been saying: there is a rotation out of small caps and into large-caps.

There is also a greater sensitivity to risk sweeping the markets these days. Traditionally, small caps, which make up a large part of the Russell 2000, have been regarded as inherently riskier investments than their large-cap brethren.

On the plus side, earnings season is winding down and earnings weren't too bad. As usual, companies provided conservative guidance and many managed to beat expectations.

Economic news has also been reasonably encouraging except of course in the area of real estate which is pulling the financials down with it. Inflation is under control, jobs are holding up, manufacturing is OK.

I do not believe the tough times for IWM can be considered predictive for the market as whole. IWM is not pointing the way down for the rest of the market.
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