Tech Stocks Are Down For September But Small Caps Are Way Down

Most stocks tend to move together but recent action in the tech sector versus small caps is remarkable: the NASDAQ
NDAQ
-100 spent the month of September in a downtrend but it’s nothing compared to the drop off in price for the Russell 2000, the index that represents smaller capitalization names.

The evidence from the price charts is clear that the market as a whole has weakened much more than the closely followed tech and social media stocks. As representative of the overall economy, this divergence of the 2 sectors is worth studying. Generally, it would be a better look if the small caps fell at a less dramatic rate.

This is the daily price chart for the NASDAQ-100:

The popular index containing the big tech and social media stocks peaked in mid-July at 15800 and this week hit 14500, for a drop of 8.2%. The 50-day moving average (the blue line) has turned over and is heading down now but the index remains well above its 200-day moving average (the red line).

Compare this to the daily price chart for the iShares Russell 2000 ETF, right here:

This small cap benchmark peaked in late July at $198 and fell this week to just above $174. That’s droppage of 12% from the high to the low. Note that the 50-day moving average has clearly bent back downward and that the price is now trading below the 200-day moving average.

The weekly price chart for the NASDAQ-100 index is here:

The view from this longer-term shows a substantial rally from late last year to the present — but, so far, the tech-heavy index is unable to make it higher than those late 2021 highs. It’s a positive that both of the significant moving averages continue to trend upward.

Th weekly price chart for the iShares Russell 2000 ETF looks like this:

So, the small caps peaked in late 2021 and since then have not shown enough strength to take prices to even near that level again. The last 2 weeks of September have taken the benchmark to below both the 50-day moving average and the 200-day moving average, generally a bearish kind of sign.

The big tech and social media stocks get a lot of coverage in the financial media — it’s important to note that at least one less followed sector is not keeping up.