Plug Power, Penn National Gaming And Caesars: Key Small Caps Head Down

The 3 biggest components of the most watched small cap index peaked in price weeks ago and seem to be rolling over. Obviously, since there are 2000 stocks in the measure, you can’t derive conclusive opinions about what it means. On the other hand, it’s definitely interesting to note the weakness.

That’s weakness compared to the widely followed big name, big tech stocks that keep hitting new highs. It’s hard to escape hearing about them if you watch or read major financial media. The all time highs recently achieved by the NASDAQ-100, the S&P 500 and the Dow Jones Industrials do not reflect the wider stock market.

Take a look at the weekly price chart for the Russell 2000 index of smaller capitalization companies:

Friday’s closing price is the lowest close since late January/early February. The index actually broke that support level. Note that despite the similar peak levels achieved in March and in June the relative strength indicator (RSI above the price chart) and the moving average convergence/divergence indicator (MACD below the price chart) are negatively diverging from price. The powerful upward trend off the March, 2020 pandemic lows may be in question. If you had just heard the generally bullish headlines about stocks, you may have missed this.

Let’s take a look at the 3 biggest components of this small cap index.

Plug Power’s weekly price chart is not hitting all time highs:

The hydrogen fuel concern, a favorite of some hedge funds and other big institutional investors, is failing to keep up with the Apple, Facebook and Microsoft crowd. Since hitting its all time high of 67.50 just 6 months ago, Plug has dropped in half and then some, now sitting at 26.91.

The Penn National Gaming weekly price chart looks like this:

They made sure to put “National” in the company name so you wouldn’t think it’s just about gambling in Las Vegas. The stock peaked in March at 130 — a powerful uptrend coming off the March, 2020 coronavirus lows. Today, Penn trades at 66.21, so it hasn’t completely dropped in half but it’s close.

Caesars Entertainment’s weekly price chart looks like this:

It’s holding up better than the other 2 largest index components, isn’t it? The price hit a high of just above 110 in early June and has since dropped to its current 89.90. The RSI and MACD for Caesars may be rolling over here. Still, the strength of the move from March, 2020 to now remains apparent.

(Full disclosure: when I lived and worked in Las Vegas at KLUC-FM from 1987 to 1991, I played the blackjack side bet of “Over/under 13” at the Caesars 21 tables. It was easy to beat and that’s why it no longer exists there. My Forbes interview with hedge fund manager and blackjack expert Ed Thorp may be of interest.)

So, when you hear or read about the stock market’s new all time highs, please consider that the small cap index and significant Russell 2000 index components are not up there on that score with those major big tech firms that dominate the other indices.

Not investment advice. Do your own research and consult with with a registered investment advisor before making any decisions.

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