Both the Dow Jones Industrial Average (DJIA) and small-cap Russell 2000 closed at a 52-week high two weeks ago, and then the DJIA closed at another high last week while the Russell 2000 lost more than -1%.
Going back to 1979, this has occurred only 3 other times...
1. April 1, 1998, after which the DJIA lost more than -15% during the next six months, while never gaining more than +2.5%.
2. January 7, 2000, after which the DJIA lost more than -14% during the next two months, while never gaining more than +1.8%.
3. January 19, 2007, after which the DJIA lost more than -4% during the next two months, while never gaining more than +1.8%.
Typically, when small-cap stocks fail to lead the market, stock market advances are hard to come by and downside risk is above average.
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