The past six months shows the Russell 2000 (IWM) in choppy and impulsive action; both up and down.
The last eight trading days have seen that choppy action begin to exhibit a hint of order.
It does not look like much … until you put in a trend-line .. or two:
Adding to the intrigue; channel width is at Fibonacci 8-Days.
If today’s session closes lower (no guarantees) and posts a new daily low (below 220.26), it adds weight the Russell may be in the very early stages of trending lower.
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.
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.
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.
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.
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.
The table lists well known index ETF’s; along with most recent highs and current (Friday) close:
All the usual suspects are there:
S&P 500, SPY, The Dow 30, DIA, Nasdaq, QQQ, and on.
What’s also listed is how far each index (ETF) is from its most recent all time high or ‘recovery’ high (in percentage terms).
Obviously, one of these is completely out of bed: Biotech, IBB
We’ll be discussing the technical condition of biotech tomorrow. For now, the updated ‘project’ chart’s included below:
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.
Trending higher at nearly 1,000% annualized, it’s obvious a break is coming.
Exactly how or when of course, is not known.
However, it has been proposed by this site (for years), when the final bubble-break comes, it’s likely to be an over-the-weekend event that results in a severe gap down open.
A gap down of say, 20% – 50%.
Can’t happen? After the events of 2020, we should all know that anything can happen.
Theoretically, a gap down of -25% from current levels, puts IWM right at long-time support around ~170.
Under such conditions when a severe disconnect is possible, one approach is to prepare on the short side (not advice, not a recommendation).
Using Wyckoff analysis techniques (for bear markets), that means to look for sectors not participating in the mania. When the downdraft hits, those markets will (potentially) move lower farther and faster.
That brings us to real estate, IYR
Using the same time-scale and trend line notations, we get the chart below:
From a purely visual perspective, the struggle to move higher is obvious. The past two sessions have made no net progress.
Looking more closely at recent action, IYR is following a Fibonacci time sequence.
From the low on January 12th, to the most recent high on Wednesday the 10th, is a Fibonacci 21 days.
The added bonus is the inflection point on Day 13.
Bid/Ask spreads on inverse fund DRV, in the pre-market are not that reliable; at this juncture, 8:10 a.m., EST) they indicate a higher open.
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.
Pre-market action has all major indexes trading lower; SPY, DIA, QQQ, SOXX and IWM; all down.
Real estate, IYR has no real pre-market volume (20-shares) so its open is unknown. However, inverse fund DRV, does have volume (3,700 shares) and its action is up about 4%.
The daily close chart of IYR (above), has price action contacting an established axis line.
That was yesterday. Over the past two-weeks, as price ratcheted higher volume has declined (circled area enlarged).
That decline indicates lack of commitment at these levels.
Yesterday’s close also put IYR firmly in up-thrust position (ready for reversal).
Over the past week, short positions were opened using DRV (not advice, not a recommendation)
Average price of the short equates to DRV @ 9.92; not far from current pre-market trading.
If IYR posts a new daily low (below 86.62), it’s another data point the anticipated reversal may be at hand.
The rising action has changed the P&F forecast reported a few days back. Updates will be forthcoming.
If this is the start of a sustained reversal, the plan is to build the short position as price action dictates.
The downside of the entire market (S&P, Dow, etc.) is immense. Commercial real estate is especially vulnerable. Price action itself tells us that.
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.
Of the nine market indices listed below, only one has a bearish weekly MACD cross-over: Biotech
IYM: Basic Materials
IBB: Biotech
DIA: Dow 30
IYT: Dow transports
QQQ: NASDAQ 100
IYR: Real Estate
IWM: Russell 2000
SOXX: Semiconductors
SPY: S&P 500
Yesterday, the indices were are at all time highs except for real estate (IYR), biotech (IBB), and Russell 2000 (IWM).
Looking at IYR and IWM, we can see, although they are below the high, there’s still a persistent up-trend.
Even with today’s on-going reversal (three-hours before close), only biotech has posted a bearish, weekly MACD cross-over.
Of course, it won’t be known until after the fact why biotech is unique. A hint at what might be the reason, is here (if it’s still available).
A gallery of the weekly index charts, listed above (as of 9/2/20) can be found here.
The focus of this firm, since June 3rd, exactly three months ago, has been biotech and its impending reversal.
A significant short position has been established over those three months via BIS, the 2X, inverse fund. Current Stop: 32.18
So, just what is ‘significant’? How big is that?
To be transparent, without giving specifics, avoiding the usual internet keyboard warrior, and/or hater, the position is as follows:
We’re short what amounts to a full year’s wage for the typical American worker. Fair enough?
When the position is closed out, results will be posted on the company site, located here.
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.
That’s the direction of the Dow Jones 30, the S&P 500 and the Russell 2000.
Intermediate and advanced trading professionals understand what this means.
When a market has experienced a long, sustained advance that may cover months and years … near the end of that advance and just prior to the ultimate top, the market thins out.
That’s the process whereby fewer and fewer stocks are participating in the advance. Essentially, the bear market has already started as more and more stocks fall away from the uptrend.
In fact, ZeroHedge just reported the S&P 500 in its narrowest (11-day) closing range in history: An unprecedented event.
Now that we appear to be at the upward extreme, what happens next may be unprecedented as well.
That’s the direction of the Dow Jones 30, the S&P 500 and the Russell 2000.
The Danger Point® 