There we go: Wall Street small-caps are on the verge of collapse


Right after Janet Yellen kindly suggested that small-caps in Wall Street may be overpriced, everyone started selling (and even shorting) them: Bank of America explains why this whole situation could turn out to be really, really bad

(original publishing date: 05-12-14)

You don’t fight the Fed.
As we expect the first Wall Street trend correction to come from Nasdaq, the recent worries expressed by Federal Reserve Chairwoman Janet Yellen on small-caps being overpriced are creating some damage to US equity market.

As BofAML’s Macneil Curry points out, everyone following small-caps is holding his breath:

Russell 2000 is really close to the 200-days moving average, but this has already happened in November 2012 without any relevant consequence.

But this time is different, just look at the monthly graph.
As you see, the index is dangerously close to the 5-year trendline support, and this support has never been broken.

Now what would happen if the small-caps selling didn’t stop ? As Macneil Curry suggests, more pain may be coming for US equity market…


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