A Stock Market Bear Walks Into a Bar…

Michele Schneider

After taking a few days off, I saw that the Russell 2000 ETF NYSEARCA: IWM closed at 164.88 a week ago, marginally hanging onto its 50-Daily Moving Average.

Then, Monday February 10th, the Russell 2000 (IWM) had an inside day.

Tuesday, it gapped higher.

Thursday it broke from its 5-day trading range to the upside.

And Friday, IWM sold off, yet maintained an inside day to Thursday’s trading range.

In fact, the Nasdaq 100 and S&P 500 also had inside trading days.

Only the Dow Jones Industrial Average broke last Thursday’s low on Friday, after it had made a new all-time high.

stock market bear feeling bad

So, a bear did indeed walk into a bar, but did his boot kickin’ whiskey inspire or hamper him? 

The level of resiliency in the market is in a word-astonishing!

Consider:

Stock market bulls have some good arguments. 

All one needs to do is see the Central Banks policy, corporate buybacks, and the sidelined cash with nowhere else to go as sound reasons to think the market will never correct.

Heck, even Berkshire Hathaway finally threw in the towel and bought S&Ps, Kroger and Biogen stocks.

Also to consider:

The Volatility Index ETF (VXX) reflects very little fear.

The Junk Bonds ETF (JNK) recaptured the pivotal 110 level.

Plus, even with the inside day, IWM did close up week to week.

And the government? 

Well that’s a first. I remember the Bush administration urging Americans to shop after 9/11.

But that is a far cry from offering tax incentives for those who buy stocks. That is no better than an inexperienced financial planner telling their clients that the market always comes back and never stays down too long.

Is the government planning to reimburse Americans for their losses? 

Or do they believe they can overcome any obstacle with market manipulation?

These proposed incentives will be tied to profits only. Not to mention loaded with “read-between-the lines” caveats.

Seriously though, if the government is not going to teach you a trading strategy, then I will do my best to teach you one.

Watch the Russell 2000 IWM and Transportation IYT.

As Geoff wrote last week, “We’ll likely have to wait until next week to see if this breakout is for real. Until then, the key level to hold (in IWM) is 167.”

In Transportation IYT, Friday’s bearish candle and breakdown back into a caution phase gives us two very reliable patterns to watch.

IWM must hold 167 and IYT has to get back over and close above 195.51. 

A Bear walks into a bar.

The bear says: “I’d like a whiskey and……………………….coke please.

Bartender says: “Why the big pause?”

Bear replies: “I was born with them.”

On July 12-13, 2020, I will be speaking/teaching at the Modern Traders Summit in Philadelphia. Only 5 speakers, which means attendees will get a lot of attention, I hope to meet many of you there: https://moderntraderssummit.com/2020-speakers/

S&P 500 (SPY) Inside day. 335.56 is first price support, then 333.42

Russell 2000 (IWM) 167 is price support and 170.56 is the high to clear.

Dow Jones Industrials (DIA) 292 is underlying price support.

Nasdaq (QQQ) 230.50 is price support.

KRE (Regional Banks) Still in caution phase so must clear 57.01 resistance and stick.

SMH (Semiconductors) 147 is price support.

IYT (Transportation) Unconfirmed caution phase. 195.51 to clear and 195 the 10-DMA to hold.

IBB (Biotechnology) Inside week reflecting a bullish bias. 123.48 is the resistance to clear.

XRT (Retail) Looks better on the weekly price chart but has to clear 45.24 on the daily one.

Volatility Index (VXX) 14.20 is the first price area of interest.

Twitter: @marketminute

The author may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

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