The resilience of the markets continues to be pretty impressive. Despite the uber-fast runup over the last couple of months, there’s been almost no appetite to sell… at least when you look from a headline perspective.
That being said, there are signs that underneath the surface risk-aversion is starting to steep in.
Yesterday we brought you a Chart Of The Day from Doug Kass, who pointed to the divergence between the S&P 500 (which is holding up) and the Dow Jones Transports Index, which is breaking down. But arguably transport weakness can be blamed on oil prices.
The problem is that the weakness isn’t just in transports.
Today’s chart gets at a similar idea from Waverly Advisors, but this time it focuses on the ratio between the Russell 2000 and the S&P 500.
And once again, we see a breakdown, whereby the small-cap, riskier, Russell 2000 index is starting to dive vs. the broader market.
In this chart, the dotted, black line is the ratio, and the orange line is the 20-day moving average.In itself it doesn’t confirm anything, but taken as part of a broader trend whereby the riskiest of the risk assets are starting to sell off (and that includes other exotic areas, like Italian banks, and Greek equities) you’re starting to see the base erode.