The Stock Market Takes a Bath

One day after Hammy’s bath, the market took one too…

Last night I wrote about Hammy, and that his spring bath was delayed until this past weekend because of unusually cold weather.

Before Hammy’s bath, the Russell 2000 (IWM) reached a high of 157.47 last Friday.

Yesterday, the Russell 2000 confirmed the improved phase change to Accumulation, but failed to recapture the 50-week moving average (blue line.)

Sign up for our FREE newsletter
and receive our best trading ideas and research

Today, IWM fell by over 1%. As if right on cue, soaking Hammy in water (Year of the Pig with a water element) corresponded perfectly with IWM and the Dow falling by around 200 points.

Furthermore, the Russell 2000 failed the accumulation phase and deteriorated back into a recuperation phase.

Is Hammy’s bath and the market decline merely a coincidence, or will the bulls also get soaked? 

russell 2000 iwm etf analysis price decline selloff investing news april 9

What we like to look for is topping patterns or reversals on indices or sectors that made a new 60+ day high and then failed.

The Semiconductors ETF (SMH) is one prime example.

After making a new swing high yesterday at 112.90, today, it closed below yesterday’s low. The volume was under the daily average, yet damage is done.

Furthermore, the Transportation Sector (IYT) also had a reversal topping pattern, while Biotechnology posted a 2-day reversal pattern. 

IWM did not post a new 60+ day high last week. Therefore, we can consider this a pullback, but not necessarily a reversal.

Nevertheless, should SMH IBB and IYT sink further, I would expect to see IWM test the 50-DMA at 153.75 first.

And with further weakness, we could see the March low or 148.41. 

Mind you, Hammy hates bathing, but he likes food more.

So, if the market can find reasons to feast-like a better than expected earnings season, then maybe the prophecy of the ensuing 5-year bear market will be as unsubstantial as a ham sandwich.

S&P 500 (SPY) – Swing high at 288.91. 287.37 now pivotal and support at 285. 

Russell 2000 (IWM) – Unconfirmed recuperation phase. 156 now pivotal.  153.75 support

Dow (DIA)  – 263.61 now pivotal. Under 261.10 can see 258.

Nasdaq (QQQ)  – Inside day. Swing high 185.28- Watch 183.63 to hold 

KRE (Regional Banks) – 53.40 pivotal resistance. Under 52.68 more trouble

SMH (Semiconductors) – Swing high at 112.89 which made 111.79 the place for this to hold. It did not. Now pivotal.  109.50 next support.

IYT (Transportation) – Swing high at 193.78. After 2 days, closed weak but over the 200-DMA at 189. Where I’d be looking.

IBB (Biotechnology)  – 115 key pivotal resistance and 110.50 key support.

XRT (Retail) – 45.50 now pivotal with 44.48 huge support to hold.

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.