Hi. I have been watching the index spreads for months. Here's a couple things: IWM is the hedge leg for the Dow. This is because the Dow needs a hedge that has broad sector make up. This trade is a favorite among prop firms for equity spread trading. This is the original 'cap spread.' Huge money in this one. Check it out. Seems like you just had bad timing. The spread is long YM short RTY with a 2:3 ratio. A months long trend was unwinding which made your pair trade suffer. The Russell 2000 had a massive bid that lasted for about a week while this thing unwound.
I tried for over a year. Pairs were selected with correlation and co-integration and back tested. Have to watch for any upcoming earnings or other factors behind stock to avoid surprises which interrupt correlation. Stop tolerance had to be wide. I lost money and moved on to other methods. Not that it doesn't work but I couldn't get it to work for me.