Why to follow the Russell 2000 when the S&P 500 considered better tool to analyse market. My opinion is that you have to follow it if you want to be beter than other and one step ahead of other. The Russell 2000 has the smalles (from Russell 3000) companies and smallest companies in times of worries are the first to get hit. See the charts below: Charts courtesy of www.marketvolume.com
Sorry, but I don't see anywhere on your charts where the Russell is a leading indicator. In fact, any pullbacks pretty much parallel the S&P.
The S&P500 is the standard benchmark in the financial industry. Small cap value * has been academically proven to produce highest decile alpha premium of all stock universes over 90 years https://docs.google.com/document/d/1kToqLWLISRk4n4YnSzv1hT5kBN54l5CvhwGgDwJKPJI/edit?usp=sharing. http://www.etf.com/sections/index-investor-corner/swedroe-small-caps-still-outperforming?nopaging=1 The Russell 2000 has mainly a "growth" composition yet is a strong contender for "investment" ( over the long term ). It is important to use an analysis tool that takes into account "total return" and we can see that the Russell 2000 beat the S&P500 ( VFINX index fund used here ) over a 16 year span using this calculator: http://tinyurl.com/jntxy4y Additionally, it outperformed Berkshire Hathaway ( Warren Buffet ) over the same period tinyurl.com/jze9dzz. This little known outperformance fact that small cap is a "superior" index based on academia, gets lost in all of the focus on Buffet's genius and activities. * Further, small cap "value" has outperformed the Russell 2000 over that sample tinyurl.com/z229923 It's important to stress that within the "trading" mindset, that having a core position of small cap value ( preferably within a tax deferred account such as a Roth IRA ) invested for the long term has provided superior compounded returns vs. other asset classes.
They are in paralel, but reversal down starts with delay after the Russell 2000. Before March 2014 they aligned in time also. Now, S&P 500 reverses down with a delay. Yes, they both dive down in paralel - just Russell 2000 does it first. Let's see what indexes wil reverse first during the next reversal.
That chart isnt very convincing imo. Check out http://stockcharts.com/freecharts/perf.php?SPY,IWM Do a detailed analysis close up of those two using the above tool and come back and tell us if there is any truth to what he is saying. I find you have to do your own research in order to believe anything.
The same, which should be as SPY tracks the S&P 500 and IWM tracks the Russell 2000. The Russell started to decline at the end of June of 2015 while the S&P 500 was flat until the middle of August 2015. Russell 2000 dived down in Nivember 2015 and S&P 500 was still close to the resistance in the middle of december 2015. I am not trying to convince any one. I made an observation and I posted. If you consider I am wrong that is fine with me.
Your right Russell is leading indicator. I looked through it also. The Russell isn't confirming the present short covering rally.