“The Russell 2000 chart printed a bull-trap with the failed breakout of the March highs. That breakout was on weak breadth,” he wrote in a newsletter Monday. “That indicator showed a strong negative divergence on the breakout, revealing that not all the troops were participating with the advance. When that occurs, more often than not, there is swift retreat.”
The small-cap index is in a falling channel and dropping through the floor of the channel would indicate an accelerating downtrend, Coe added.
Full disclosure: Tom Lydon’s clients own SPY and IWM.