Russell 2000 charts still bearish despite slight gains

It would be easy to take a look at this week’s price action in small-cap stocks, shake your head in disbelief, then come to the conclusion that it was much ado about nothing. How about the largest one-day decline of the year on Tuesday, sandwiched between two above-norm daily gains? Or how about the fact that Tuesday’s epic collapse came on the heels of the previous largest one-day drop just three sessions earlier? But when all was said and done, what was the end result? The Russell 2000 (NYSE:IWM) was up all of 0.18% for the entire week’s worth of aggravation. As I’ve noted, it was the kind of week that only a day trader with great entry and exit points could love.

Despite the relatively tame finish to a manic week, there are some interesting themes to investigate. Let’s start with the good news: first off, the market was able to grind out a mild advance even though most of the news had a decidedly bearish tilt. For instance, the fourth-largest investment bank in America -- Lehman Brothers Holdings Inc. (NYSE:LEH) -- was basically relegated to the scrap heap, apparently another potential casualty of the long-running credit crisis that has been gripping financial stocks for over a year now. What’s more, the world’s largest insurer – American International Group Inc. (NYSE:AIG) collapsed 47% this week, while LEH unraveled to the tune of 77%. And of course, that all took place just a few days after mortgage giants Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) became a government bail-out project. On May 2, 2008, those four stocks had a combined share price of $152.65; on Friday, they were worth all of $16.60. And on top of all that, the economic news wasn’t good. Continuing claims for unemployment paychecks approached a five-year peak; retail sales declined when everyone said they would rise and our international trade deficit ballooned to $62.2 billion, the highest in 16 months. Oh wait, this was supposed to be the good news part of the story!

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