During periods of extended market weakness, small caps tend to fare worse than large caps because they have less institutional sponsorship.  We can see this by comparing two ETFs, Direxion’s 3X Small Caps Bull (TNA) and Direxion’s 3X Large Cap Bull BGU .  With the Dow down 1.21% on Wednesday, Direxion’s small cap ETF lost 9.74%, while the large cap ETF lost 6.09%.  That’s more than a 3.5 point  difference and means small caps lost about 60% more than large caps.  Volume was above average for both funds, with TNA trading 60% more shares than normal and BGU trading 25% more shares than normal.

Meanwhile, a surprise drop in home sales didn’t help the market.  New home sales fell by 3.6% for the month of September.  Hardest hit markets included the West and the South, declining by 11% and 10% respectively.  On the bright side, the Midwest saw a 35% spike in sales. One reason for the overall decline could be the amount of time it takes for a deal to complete.  The government’s $8,000 tax credit expires at the end of November, which may not allow enough time for some homebuyers to finalize a deal. In other news, gasoline supplies came in higher than expected, causing gasoline futures to fall 4% and oil to drop below $78/bbl.