Bearish Wedge Poised To Break Down
The Russell 2000 (IWM as proxy) has been congesting sideways for about five months.
While the overall markets, S&P, Dow, SOXX, IYR and the QQQs, have been moving on to new highs … the Russell has stagnated.
Taking a cue from Steven Van Metre’s reports on ‘who goes first’ in a downturn, it’s the small caps.
At this juncture, it looks like the Russell’s ready.
The six month daily chart of IWM below, shows choppy action.
Pulling back somewhat and labeling the bearish wedge, puts it into perspective (second chart):
Pulling out and labeling the wedge:
One item of note (not shown) at the top of the wedge, where price action pivoted lower (August 6th), is a Fibonacci 62%, retrace level.
So, we have a bearish wedge retracing 62% … along with non-confirmation of the overall highs; S&P, Dow, SOXX, etc.
Major reversals take a long time to form. However, once they get underway, it’s like a juggernaut to the bottom.
Harkening back to the oil (USO) bear market of 2014, nearly all (if not all) the YouTuber’s at the time, completely missed the bearish set-up.
What they did instead, once the downdraft started, was pump out update after update about ‘catching the bottom and setting up for the new bull market in oil’.
It never happened.
Oil continued lower for a year and a half before getting into a sideways range.
The big money’s in the big move. Monitoring the Russell provides confirmation a significant reversal’s in the works (not advice, not a recommendation).
As with biotech (SPBIO), already in a bear market, the IWM could break lower while the overall markets continue to thin-out and even make new highs.
Recall, we’re getting close to an up-coming holiday: Labor Day
The 1929, high was on the Tuesday just after Labor Day weekend.
Charts by StockCharts
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.