IWM Fails to impress Again

My Sunday video about the Santa Rally focussed in large part on the leadership which was in the more defensive oriented Dow when the small caps should have been leading, like the Russell 2k/IWM. This was the basis of my ideas about a Santa Rally being a dud.

Looking at the IWM's breakout at the end of day, first the IWM lagged the Russell 2k, now I understand that the managers of the ETFs can't always match performance of the underlying average point by point, but a difference of .16%  ( a 15% difference in the ETF vs the underlying) is excessive. One of the reasons I like ETFs for analysis is that is where market participants express an opinion in 1 stock rather then tracking the nearly 2000 individual components and I have found from time to time that the difference between the average and the tracking ETF isn't a matter of management (well it is in a way), but it is a difference in opinion as one sees heavier selling or buying, so in some instances the ETFs performance vs the underlying (so long as it is not a small insignificant difference, a 15% tracking difference is not insignificant) can often tell you something about the mood of traders.

Furthermore the IWM barely outperformed the more defensive DIA (1.08% vs 1.07% respectively), earlier the IWM was leading by a better margin. As for the breakout itself, the IWM didn't look great.

As a matter of fact, by the lose, it failed and closed below the breakout level. Furthermore it looked like it was hitting rough resistance, but there wasn't much in the area that was strong resistance.

Small caps should have led. As I said earlier, a false breakout to the downside would probably have meant that the consolidation was going to continue its leg up, but seeing a breakout to the upside first, that' more bearish as 80% or so of these breakouts are head fakes and the price pattern of the seemingly bullish ascending wedge was there all day and was about the only thing to look at so it was obvious. So unless this was a breakout in the 20% (real breakout), I would tend to call this a more bearish move. For those who may be puzzled by what I'm saying, the heart of my comments lies within the fact that what Technical Analysis has taught you and everyone else over a century, is now being used against you as traders become predictable, it makes it easy for Wall Street to take advantage of that predictability.

The only real positive for the market I see right now is that the Euro broke out, but it's been less then an hour and it will move around a lot overnight.

Tech didn't get much of a boost and Financials didn't make any use of the move.

 XLF didn't make any new highs...

and compared to XLK during the day, the move there was negligible. AAPL after the break made 3 lower highs/lower lows, it didn't take the bait and run.

Much like the end of day ramp in stocks on Friday December 23rd, which in my opinion was used to keep longs in place over a 3 day weekend when they would normally be closing positions, which led to the downside we saw yesterday, there was no positive divergence before the ramp and no confirmation in the SPY.

 This is last Friday's ramp at the end of the day, note there was no positive divergence suggesting shares were being accumulated to sell in to higher prices on the open this week.

 This is today, no positive divergence either, no confirmation in the 1 min or the 2 and 5 min charts below.

 2 min

5 min.

So we'll see what the Euro and ES does overnight, maybe we get an opportunity early tomorrow to put on some trades. I'll be updating as I have a chance to look at the charts more closely.