The Russell 2000 Is Agnostic to The Market’s Crèche

April 1, 2019

Mish's Daily

By Mish Schneider


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From the private collection of Arnold Lieberman

A crèche has three meanings.

In North America, it means a model representing the nativity scene.

In Britain, it means a daycare center.

In zoology, it means animals that take care of young that is not theirs.

I like all three meanings for the market.

Today’s action looks like a representation of the miraculous rebirth of a rally.

The market is now babysitting bearish traders who need looking after.

And, our Year of the Pig mascot Hammy, is caring for the baby bulls.

It is also possible that our crèche is really Granny Retail in yet another disguise.

After all, it was her lead that gave confidence to Transportation IYT (noted last week) and the rest of the Family.

Nevertheless, with all the strength over the last several days, Granny has yet to really convince one key Modern Family Member-Granddad Russell 2000.

Why is IWM agnostic?

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In the Daily chart of the Russell 2000 IWM, although IWM has cleared the 50-DMA (blue) at 152.59, each rally has put in lower highs.

While the S&P 500 negated its topping pattern by clearing the 285.18 high in early March with today’s high 286.16, the Russells lag.

The Dow also negated the topping pattern from February and put in a new swing high today at 262.66.

As an aside, whereas NASDAQ and Semiconductors also all had topping patterns, neither were able to do what SPY or DIA did today.

That’s cool though-I would not consider that a negative unless SPY breaks today’s low at 284.40.

But then again, last time we talked about the aforementioned indices and SMH’s outperformance, IWM did not participate.

On March 21st, while SPY QQQ and SMH made a new multi-month swing high, IWM rallied, but could not come close to its 200-DMA (green).

Today, IWM rallied again. Yet, not only did it fail to see the 3/21 highs (156.06), it remains a distance from the 200-DMA at 156.79.

Significant?

If you look at IYT’s performance today, up over 2% and now above its 200-DMA maybe not.

Note that 192.27 is IYT’s swing high from 2/19.

I’d look for any of these scenarios to play out.

  1. IYT clears that high and IWM plays catch up.
  2. SPY reverses from its new swing high while QQQ and SMH never reach theirs.
  3. IWM sells off, spooking everyone else making #2 more likely to happen.

If a crèche does exist in the market, then I hope this guidance serves as the three wisemen!

S&P 500 (SPY) New swing high today at 286.16. I will be following the 3 scenarios laid out

Russell 2000 (IWM) 154.55 pivotal support tomorrow. 156.06 resistance

Dow (DIA) Watch today’s low 260.58 to hold

Nasdaq (QQQ) March 21 high 182.83-that has to clear

KRE (Regional Banks) Loved the selloff in TLTs today. 53.40 resistance and 51.40 the immediate support to hold

SMH (Semiconductors) 110.60 the 3/21 high to clear. 106.65 immediate support

IYT (Transportation) 189.15 now critical support192.26 the high to clear

IBB (Biotechnology) 110.75-111.18 critical support to hold

XRT (Retail) 45.50 resistance and 44.65 area the support

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