The markets pulled back a bit today, but on weaker volume.  The divergence between SPX and RUT continues. SPX closed down $9 at $1889 while RUT lost $18 to close at $1103. Volatility remains low with the VIX unchanged at 12.2%. Trading volume was weak with 1.7 billion shares of the S&P 500 trading. Trading volume declined 3% on the NYSE and declined 6% on NASDAQ. SPX continues to trade above its 50 dma, but RUT has now once again broken the 200 dma.

Yesterday, retail sales disappointed investors with a weak 0.1% gain in April after a 1.1% gain in March. Today, the PPI came in with a 0.6% gain in April, building on last month's 0.5% gain. Too little to run up the inflation flag yet, but it is worth watching. All in all, it is hard to explain the small cap weakness. The economic data are not strong, but they aren't weak either.

Ten year treasury yields broke support today and dropped to lows not seen since October. This may suggest a flight to the safety of treasuries. Maybe the small cap weakness seen in RUT is an early warning sign? I have been reluctant to give the bears a nod as long as the Fed is strongly supporting this market, but RUT's weakness the past two days has my attention.

Unless RUT opens higher tomorrow, I will be closing my May put spreads even though they are still over two standard deviations OTM.