As the Russell 2000 (RUT) dipped lower and the SPX and NDX moved higher, investors asked themselves if the divergence could be foreshadowing a possible mid-large cap correction.
Quite possible, but you must realize the RUT since the March 2009 bottom, has under performed the SPX by a metric of 10%.
You can see from the chart below the, the recent divergence started Tuesday morning with the RUT breaking down and also Wednesday when it failed to make a new high with the SPX.
Looking back from march 09 to today, the RUT has consistently underperformed the SPX by 10% . From march 09 to the April 2011 highs the RUT is 39.4% higher while the ES 48%.
|3.2 year RUT SPX comparison|
What does this mean? means there are times where the RUT over reacts a bit while the greater index remain more stable.