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Is there trouble underneath in the market?

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The Dow Jones Industrial Average has rallied following its March 2009 low's, but the critical issue is whether this is just a bear market rally, within a long-term secular bear trend. DJIA is breaking new highs for the year, but there may be trouble brewing underneath if one looks at the Russel microcap index, suggesting that investors are fleeing to the blue chips and this often warns of an impending reversal of the market as a whole.

The DJIA is making new highs with the daily charts show healthy trending moving averages but the RSI is flat, MACD is turning down.

On a longer-term view, the weekly DJIA chart shows a healthy trending of the moving averages, a rising RSI and MACD.

The Russell Microcap index daily chart shows a breach of the trending moving averages, a falling RSI and MACD.

Russell microcap index weekly charts show a more sinister confirmation of the falling RSI and MACD and the moving averages being tested to provide support.

The divergence of the DJIA vs. Russell microcap index suggests a potential weakness in the investor sentiment and flags a possible reversal of the general market. Therefore, the microcap recovery should be closely watched to confirm the continuation of the ongoing trend.
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