Russell 2000 falls into downtrend;
The small-cap oriented Russell 2000 index RUT, -0.08% on Thursday fell below its widely-watched 200-day moving average for the first time since June 29, 2016, or about 14 months. The 200-day moving average is viewed by many chart watchers as a dividing line between longer-term uptrends and downtrends. Moreover, small-caps are viewed as gauge of economic health, with a divergence suggesting that investors aren’t sufficiently bullish about the near-term outlook for equities or the economy. The index briefly turned negative for the year on Friday.
Gold futures GCZ7, -0.16% jumped above $1,300 an ounce, for the first time since the U.S. presidential election back in November. Gold has traded above both its short-term and long-term moving averages. There have been a number of factors influencing that move, including a weaker dollar DXY, -0.27% and diminished expectations that the Federal Reserve will raise interest rates again in 2017. But overall, haven demand amid worries about stock valuations and a number of risk events have been a big driver for the yellow metal and may signal that investors are hedging their bets for an equity slide.
Dow transports break down;
The Dow Jones Transportation Average DJT, -0.62% which includes airline, railroad, and package-delivery companies, has been diverging from the Dow Jones Industrial Average. This is viewed as a sign of overall weakness in the market because so-called Dow theorists posit that the companies that move goods and services should be climbing in lockstep with the broader market. When they don’t, it is viewed as a bearish signal and one that may eventually see the broader market fall.
A greater number of stocks are hitting 52-week lows than 52-week highs on the New York Stock Exchange—something the market hasn’t seen since July 2015, according to Jason Goepfert, president of Sundial Capital Research. MarketWatch’s Sue Chang explains that this is a bad omen for markets because it shows gains are based on a narrow selection of individual stocks. A healthy uptrend involves a greater swath of companies moving higher. That said, the pullback in individual stocks may make some sense given the trepidations around lofty valuations.