Market watchers and strategists have often paid extra attention to the movement of small-cap stocks and emerging markets in addition to the S&P 500 and other senior averages. In the hunt for outperformance money managers need to watch the relationships between these various averages or indexes.
Let's check out the charts of the small-cap heavy Russell 2000 index through the iShares Russell 2000 ETF (IWM) .
In the daily bar chart of IWM, below, we can see that the shares made a very steep drop from February into March. Prices managed a rebound or recovery into October but prices are still below their best levels seen in January and February. Prices are above the rising 50-day moving average line and above the 200-day moving average line but its slope is negative.
The trading volume has been declining since March. The On-Balance-Volume (OBV) line shows a rise to early September and then a dip and recovery to a slight new high. Trading volume was light in the past week and the OBV line has declined to tell us that sellers are more aggressive.
The Moving Average Convergence Divergence (MACD) oscillator is just above the zero line and it could easily reverse direction and turn into a sell signal.