Small-cap index perilously close to death cross -- and that's bad news for the broader stock market

[Algernon Moncrieff]

MarketWatch

A closely followed gauge of small-capitalization stocks was a hair’s breadth from realizing a bearish pattern.

On Tuesday, the small-cap Russell 2000 index RUT, -0.26% was less than a point of seeing its short-term 50-day moving average fall beneath its long-term 200-day moving average, a formation in an asset that many chart watchers believe marks the point that a short-term decline morphs into a longer-term downtrend (see chart attached).

According to FactSet data, as of Tuesday’s close, the Russell’s 50-day moving average is at 1,615.66, while the 200-day stands at 1,615.47. Last Friday, MarketWatch reported that the death cross could play out as earlier as this week, given a steady decline in the index. Monday’s sharp, broad-market selloff certainly contributed to the downtrend.

Shares of smaller companies had climbed more than their larger counterparts because they were viewed as more resilient amid growing concerns about the U.S.’s trade spat with China. Small-cap companies derive the lion’s share of their revenues domestically.

[Cicada]

1. Is there any evidence stock movements predict the future?

Decades ago I read a study, for some reason the phrase Fourier analyses comes to mind, indicating a zero correlation between past stock price movements and future price movements. So count me skeptical.