Market Updates

Russell 2000 (IWM) in Trouble…?

The markets have been rallying for quite some time — have we finally reached the top?

That’s the million dollar question — isn’t it?

When it comes to my trading philosophy and “trading what you see” I’m always talking about how I never try to predict the markets and I don’t act or react on what I think will happen, only what IS happening NOW and what is verifiable on the charts.

This is true.  And I’m sticking to that.

But — I always pay ATTENTION to the markets and I stay up to date daily on what the general market is doing — and yesterday — was a huge range day for The Russell 2000 and the Russell 2000 ETF tracker $IWM– an index comprised of small cap stocks — the type of stocks I trade.

For quite some time now we have been trading in a range on the R2000 — and while we’re still in that range, here’s what happened yesterday.

See that huge range bar to the downside?  That’s massive and worth paying attention to.

First, we’ve broken down through the 50 day MA — so all of my trade position sizes have been automatically halved.  Why?  Because individual stocks correlate with the market at a rate of 4 to 1.

That means — finding long stocks just got a lot harder.

Second, the volume on that bar is massive.  So — caution ahead for me.

The SPY fared a little better with less of a drop — while remaining above the 50 day MA — and on less volume — but still — those ranges!

Definitely worth paying attention to.

Taking a look again at the IWM the range was 3.49% today.  The last time it was that size was the start of the infamous “Trump Rally”. Prices have moved over 15% since that date — as shown below.

So what does all of this mean?  Like I said — caution for now and half sized positions on any long small caps.

Stay tuned for more!

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