Mish's Market Minute

The Russell 2000's Weekly Bear Flag Setup

Mish Schneider

Mish Schneider

Director of Trading Education, MarketGauge.com

The Russell 2000 (IWM) weekly chart has helped us navigate the bull and bear runs for years.

While you hear so much about a V-Bottom, I see no evidence of it in this index. Significant?

Also, considering it came in having to clear the outside week trading range or move over 117.60, it did so early on and wound up closing at 112.95. Take that as a sign of weakness or a sign of a healthy pullback - that is up to you.

Regardless of where you stand, look at the potential setup on the weekly chart and ask yourself - do I want to go counter, or trade in the direction of the overall trend?

In the spirit of objectivity, we can look at the weekly chart of IWM as either a bear flag forming or a consolidation before another rally.

Case 1: A bear flag forming

The black trendline links the closing levels of the last 3 weeks. With candlestick charts, that is easy to see. Where the body of the candle ends is the weekly closing price.

Should IWM close under 104.50-105.00 this week, that is a break of the bear flag. The flagpole within the ellipse shows a measured move of $45 down if that level breaks. That sounds scary.

Case 2: Consolidation before a breakout

IWM needs a weekly close over 116.00-117.60, which would negate the bear flag. In that case, IWM could rally to around 135 before we reassess.

As of today, the instrument trades in the middle of the worst- and best-case scenarios. That makes it lukewarm in a bear trend.


  • S&P 500 (SPY): 258 support, 264.49 pivotal; today might have been the top
  • Russell 2000 (IWM): 112.56 pivotal, 105 support and 108 resistance
  • Dow (DIA): 236.80 huge resistance and 218.60 support
  • Nasdaq (QQQ): Got to 200, which I wrote was a short. So, we shall see - over 202, probably not, whereas under 188, yeah
  • KRE (Regional Banks): 35.00 resistance, 32 support
  • SMH (Semiconductors): If we take 127 as a short, should not clear 130. Under 117 not very good-looking
  • IYT (Transportation): 145 resistance, 137.45 support
  • IBB (Biotechnology): Teetering on support at 109
  • XRT (Retail): 30.00 pivotal


Mish Schneider

MarketGauge.com

Director of Trading Research and Education

Mish Schneider
About the author: serves as Director of Trading Education at MarketGauge.com. For nearly 20 years, MarketGauge.com has provided financial information and education to thousands of individuals, as well as to large financial institutions and publications such as Barron’s, Fidelity, ILX Systems, Thomson Reuters and Bank of America. In 2017, MarketWatch, owned by Dow Jones, named Mish one of the top 50 financial people to follow on Twitter. In 2018, Mish was the winner of the Top Stock Pick of the year for RealVision. Learn More