Russell 2000
Generally speaking small caps tend to be more sensitive to changes in the monetary environment because they fund growth with borrowed money and are therefore interest rate sensitive. They also tend to be affected by the availability of capital, so the advent of tapering has contributed to the underperformance of the Index this year.
I clicked through the entire constituents of the Russell 2000 section of the Chart Library last night to get a picture of how individual shares are performing. While there are some that are still rallying, the majority have experienced a loss of momentum and an increasing number are breaking down. This represents a narrowing in the breadth of the market which is also evident in other major indices.
The Index (P/E 19.35, 1.36%) is now testing the lower side of its range for the year in what has been a marked loss of momentum relative to the previous consistent uptrend. It will need to rally soon to offset medium-term top formation completion characteristics.
Some of the more interesting charts include:
Marchex lost Allstate Insurance as a customer last week and the share dropped back to test the 2009 and 2012 lows in a climactic drop. It is now steadying near $4.
Amedisys (retirement communities) completed a first step above its base in August and a sustained move below $17 would be required to question medium-term recovery potential.
Campus Crest Communities (student accommodation) might not be able to sustain its 10% yield but the downward acceleration posted over the last month represents a climactic deterioration. A clear upward dynamic will be required to signal short covering.