Neglected this parabolic in my recent analysis: the Russell 2000 small cap index.
Now see the p/e valuation, forward and trailing, compared to the Nasdaq and SP500:
And the p/b valuation versus history (and higher now since this 31 Oct read):
80% of this year’s bumper gains in the Russell are accounted for by the rises in p/e and p/b valuations, i.e. earnings have not increased, just price. And by both measures, valuations are historically frothy – unless earnings rise by some ludicrous multiple next year.
This is how the Russell 2000 chart looks on a 12 month view:
For now, safely in the middle of what is a narrowing channel, but small caps have notably been struggling more the last few weeks relative to large caps.
Disclosure: I am now short the Russell 2000.
5 thoughts on “Russell 2000”
John Hussman informed us a few weeks back that “the median price/revenue ratio of stocks in the S&P 500 now exceeds the 2000 peak”, and that got me looking at the small and medium cap indices in an effort to get a generalized idea on what those “median” stock charts look like as a group from a parabolic standpoint using Alexander Elder and Kerry Lovvorn’s TA criteria for identifying parabolic price patterns. The VLE seemed to me to be the best proxy, but there are others that also work well (like the RUT). The resulting article is here on SafeHaven: http://www.safehaven.com/article/31798/its-unofficial-us-stocks-have-gone-parabolic
And a longer term, updated, VLE monthly provisional here: http://a.disquscdn.com/uploads/mediaembed/images/738/5608/original.jpg
“Household debt showed its first year over year gains (on a quarterly basis) in Q3 since the crisis began.” per the Fed Board of Governors.
Buy the next worry is my strategy.
A dip say below 2-3% of the $RUT 50 day SMA would kick-off a meaningful correction.
Nov-Mars are statistically the strongest months of the year…