Trouble Brewing

The stock market has been trending nicely for some time now but there appears to be some trouble brewing - especially in small caps. Below is a weekly chart of IWM going back to the March 2009 lows. I have used a 12 week moving average to show what has shown consistent support along the way, while a close (weekly, remember) below was cause for concern and warned of a possible trend change until the next close above.

What appears to be developing in this holiday shortened week is that the small caps are close to closing below this 12 week moving average for the first time since November 2011. Yes, at that time it was a head fake and the following week proved that, but currently IWM is up sharply from those levels and a more cautious stance is warranted.

An indicator like this give everyone warning that the buy the dip mentality, at least for now in small caps, is in danger. Similar charts from the 2009 lows in SPY and DIA show no breach of the 12 week moving average yet but as we know things can change quickly.