Chart of the Week: Russell 2000 ETF
It’s time for our chart of the week, and this week we’re gonna be focused on small cap stocks – IWM shares – which is the Russell 2000 ETF. Let’s take a look at this chart, as it’s really showing some nice improvement over the past couple of weeks.
You saw this big drop here from the early part of August when markets got hammered on August 5. But you can see the prior couple of days for the Russell 2000 were not very pretty either. We saw a big, huge drop on heavy volume at the end of July and beginning part of August. And then August 5 hit the pinnacle of that drop right down to the 200 day moving average and stopped right there. That was a huge move down, but a big save for the Russell 2000.
Since Aug 5, the ETF has been moving higher
And ever since then, the index has been making a nice move up of higher highs and higher lows, and now we’re above the 20 day moving average here on August 20. And looking for another close about there. So if we can get above there, we can start making some headway into resistance here at about $224 on the Russell 2000.
Now, the indicators haven’t completely joined in on the party here with the price action. I would grade the price action here at least a B. It’s not quite an A yet, but it’s moving into that direction, because this price action has been pretty strong off that 200 moving average day test. We’ve gone up close to 10% since that move down to current price levels.
But the MACD is about ready to cross over for a buy signal. And as we notice down over here, Chaikin money flow is still negative. And on-balance volume, which is what I pointed down to over here, is starting to improve but it’s still not to the levels it was back in July where it was printing high levels. Now it just means that more volume was coming in on the up days than the down days.
We do see some good improvement though in the relative strength index, which has been following the price of the index – the ETF – making higher highs and higher lows. But hopefully we don’t stall out right over here and come back down. But if we do come back down, we come back down and test some of these levels here, possibly fill this gap at about $208.
If we hit a higher low, we could be off to the races
Market volatility has been coming down quite a bit. But we could see a little bit of market volatility. If we come back down and test this level and come back and fill this gap down over here, which is at about $206 and change, come back back down and fill that gap, bounce right back up again, we’ll have a higher low in place, and we could be off the races over here.
There are several scenarios that could happen here with the Russell 2000. We could keep going here right now or we could come back down and retrace from an overbought condition that we’re in right now. Remember something: “markets are overbought” is simply a signal, it’s an indication. It’s not a trigger for you. It’s an observation that it’s time to loosen up a little bit, lighten up a little bit on your positions and wait for what the next move is gonna look like.
So that’s the Russell 2000 – IWM.
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