The small caps took it on the chin today. While the SP dipped a modest .29%, the Russell dropped 2.01% like a stone and closed at the days low. This divergence is enough to be suspicious of the sustainability of the current rally. When looking at the Russell, there was a failure to make a new lower high and now the higher low may be in play, whereas the S&P over the past three days looks like a modest pullback in comparison after a strong two day bounce. For a broad market rally to sustain itself, the Russell must participate and under current light it looks like it's breaking down as it continues to underperform the S&P.
Perhaps this weakness is due to a risk off environment where money is flowing out of the smaller caps and into larger cap stocks as a flight to "safety", or perhaps this is portending of a larger flight out of equities in general. Regardless of the narrative, this is clearly a signal to be very cautious.
