A couple of weeks ago I wrote “Small Cap Stocks Are Running Out Of Gas” making the case that the Russell 2000 Index could be topping out. Just after that post the index fell 8% in just a few days time. Now I’m watching this rally carefully, looking for signs that this might be more than your “garden variety” correction.

The uptrend that has been in place since late 2012 is now broken:

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And while some indexes have retraced 50-60% of their losses already, the Russell has struggled to gain back even a third of its own:

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This looks to be a consequence of small cap euphoria that carried median valuations to levels never before seen (no, not even during the internet bubble).