Strength Of the Russell 2000

Do not be confused by the strength in the Russell 2000. For anyone who does not follow the stock market, this is an index 0f small capitalization stocks. I have explained over and over again the folly of treating the stock market as a Market.

indexThe larger the capitalization of an index, the harder it is to manipulate. The capitalization of just one of the Dow 30 components is as large as the capitalization of all of the Russell 2000 components put together.

The political agenda that determines Federal Reserve policy calls for pushing asset prices higher. The Russell 2000 is is the easiest index of all to manipulate. The first choice is always the large capitalization indexes like the Dow 30 and the Standard and Poors 500. Moving one of these indexes is like moving a boulder. Moving the Russell 2000 is like throwing a pebble. When the big indexes can’t be moved, the efforts shift to moving the next largest index, the Nasdaq 100 and then the Nasdaq Composite. If these can’t be moved, then the focus is on the Russell 2000. It is as simple as that.

When placing trades, do not be fooled into believing market direction is determined by ordinary buyers and sellers. On a day like today, the Russell 2000, closed much stronger than the lager capitalization indexes. That is not because there are better opportunities in small companies. It is because the Russell 2000 could be supported and no other reason.

The Grazin’ is Good by Curbside Jimmy, It is all about our herding nature.

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