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Reuters reports that institutional investors are concerned that a decline of the Russell 2000, the benchmark for small market-capitalization U.S. stocks, through an important technical barrier is a sign that a significant drop for the S&P 500 is coming. A statistical analysis of market history indicates these worries are likely misplaced.

It's certainly not good news that the Russell 2000 has fallen below its 200 day moving average. The index is viewed as an important indicator of investor risk tolerance and the 200-day moving average is used to gauge whether longer-term market trends are still in effect.

The Russell 2000's fall beneath the 200-day average suggests that investors are skeptical about further gains and also that the post-crisis, cyclical rally in growth stocks is coming to an end. (Even this is dubious, however; the small-cap index fell below the trend line for six months after July 2011, before starting a sustained rally.)

A closer look at S&P 500 returns since 1994 suggests that the Russell 2000 falling below the moving average is not indicative of the S&P 500's future performance.

The chart below shows the forward 12-month return for the S&P 500 after every time the small cap benchmark fell below the 200-day moving average. The bar on the left, for instance, shows that when the Russell 2000 is trading 200 to 250 basis points (2.0 to 2.5 per cent) below the 200 day, the average return for the large cap benchmark is 36 per cent.

Average 12-month forward return for S&P500 (per cent) after Russell 2000 falls through 200-day moving average

SOURCE: Scott Barlow/Bloomberg

There are no negative numbers on the chart. This means there is no evidence that a break in the technical trend for the small-cap index leads, on average, to a decline in the S&P 500.

This doesn't guarantee, of course, that the S&P 500 will climb over the next year – only that the decline in the Russell 2000 doesn't indicate anything either way.

Follow Scott Barlow on Twitter at @SBarlow_ROB.