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Morning stock market summary

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After investors were hesitant to take any risks heading into the weekend last Friday, the lack of any meaningful news on the geo-political front has caused some relief.  The pace of earnings news this morning has been slow, and the one economic report released so far – Empire Manufacturing – came in pretty much right inline with expectations.

While most major equity averages were higher on the week, the bifurcated nature of the market remains in place.  As shown in the snapshot of US equity performance from our Trend Analyzer, large-cap indices managed to squeeze out gains of just under 0.5% last week.  Smaller cap indices didn’t fare as well, though.  At the bottom of the table, you can see that mid-cap-focused indices were down about 0.5% while small and micro-cap stocks were down over 1%.  One thing all these indices have in common, though, is that they’re all below their 50-day moving averages.

Looking at the charts of indices on both sides of the market cap spectrum shows the divergent paths, although neither chart looks particularly good.  Starting with the largest cap stocks, the S&P 100 ETF (OEF) has been making a series of lower highs since its peak in the summer, and while it had rallied in the first half of last week, just as it got back near its 50-DMA in the middle of the week, the rally ran out of steam. If there’s one thing positive to say about large caps, it’s that the uptrend line from last October’s low has remained in place.

The downtrend in small caps has been even more pronounced.  After breaking down from a head and shoulders top formation in September, the Russell 2000 ETF (IWM) has continued to decline and is now testing the lowest levels since May.  While the S&P 100 is still well above its 200-DMA and just fractionally below its 50-DMA, the Rusell 2000 is over 6% below both moving averages and whatever uptrend line that had formed off the lows last fall has been broken.

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