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Dow, Russell 2000 Market Divergence -- Warning or Opportunity?

Last year the Russell 2000 ETF returned 38.9%, which was significantly more than the Dow ETF's impressive 29.4%. The Russell 2000 ETF was clearly the market leader. So far this year, the two major indices have taken divergent paths, as DIA is flat on the year, while IWM is off 5%. It can't be stated with any clarity yet if this is an opportunity, due to leadership rotation to large-cap stocks or a warning that the small-cap index is still leading and the Dow index has more catching up on the downside to come.

The economic news continues to come in mixed. Jobs are being created, but more people are leaving the workforce than getting new jobs. First quarter GDP was horrible, but many blame the weather. Mixed signs of slowing growth continue. Time will tell.

For investors who want to continue to participate in the market: be sure to recognize that large-cap stocks are the place to be right now. Those big company names are well represented in DIA.

We continue to hope that the stock market moves ever higher, but we do have an exit strategy in place should DIA fall below $158.70. That's a low risk trade for those sitting on the sidelines today!

>>Read More: Apple's 7:1 Stock Split: Take a Bite Before June 2

>>Read More: Electric Cars Won't Make Your Air Any Cleaner

-- By Jerry Slusiewicz, follow on Twitter , Facebook and Linkedin .

At the time of publication, the author held DIA but held no positions in any of the other stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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DIA $159.98 2.03%
AAPL $93.99 0.31%
FB $102.01 0.10%
GOOG $682.40 -0.10%
TSLA $151.04 0.38%


Chart of I:DJI
DOW 15,973.84 +313.66 2.00%
S&P 500 1,864.78 +35.70 1.95%
NASDAQ 4,337.5120 +70.6750 1.66%

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