Russell 2000 | Range Bound Market on Low Volume

russell 2000 top ten holdingsTuesday recap:  Equity markets continue to be range bound with nowhere near the volumes needed to get through initial resistance at DJIA 18,000 and S&P 500 2100.

Tuesday was in fact the fourth lightest trading day of the year as investors brace for 1Q earnings that will likely test their patience to look beyond what most expect to be the first down quarter for S&P 500 earnings since 2009.

The Last Hour Indicator caused havoc again, as major market averages saw moderate gains turn into fractional losses in the last 90 minutes of trading.  The Russell 2000, -0.6% at 1253.46 was the first index to go negative as mid caps and small caps significantly underperformed all broad market averages. Advanced traders should consider adding the last hour indicator to your game plan.

While the DJ Transports, +0.5% at 8607.68 bucked the trend, after declining 8 of the prior 10 days it was due for a bounce, and was likely aided by the FDX buying TNT Express, a European competitor.

This morning there is a mega deal in the energy sector with Shell Oil buying BG Group for $70 Billion, cash and stock.  Oil stocks have staged a decent rebound rally the last week as crude has rallied to the mid $50s, although is 2% to 3% lower this morning in early trading.

Today we get the “unofficial” start to earnings season with Alcoa reporting after the close, although the real action won’t start until early next week with the major Money Center Banks reporting.  It may sound like a broken record, but volume and the Last Hour Indicator are the most important signals for near term market direction.

Also pay particular attention to the Russell 2000.

russell 2000 iwm chart

On many occasions the last 6 months the Russell 2000 has led the other major market averages by a day or two as an indicator of a near term indicator.  The Russell is ahead of all other broad based market indices in YTD performance, and its early weakness yesterday definitely raises a red flag near term.

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