Today we witnessed an important breakdown in small cap equities as represented by the Russell 2000 (IWM):
IWM (Daily)
After spending the last three months hammering out a significant top characterized by substantial momentum divergences the Russell 2000 broke support to the downside today. Momentum and money flow peaked in August and the September high was a weak one which was immediately followed by weeks of distribution. Today’s breakdown comes on increasing volume for the third consecutive distribution day (down day on higher volume than the previous session).
My initial downside target for this breakdown is the ~$114 area (~4% below today’s close) which would fill in the July gaps and roughly coincide with the rising 200-day moving average and previous resistance.
It’s interesting to note that thus far the S&P 500 has held above important support near 2120 on the cash S&P index, however, today’s breakdown in small caps is an ominous sign that the senior equity indices may be next for a larger fall.
We were short equities heading into today’s sell-off, to find out how we are trading the major equity indices, gold mining shares, and individual equities/ETFs you can subscribe to CEO Technician Premium and gain access to the Trading Lab where live trade setups/updates/analysis is posted in real time!
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