Mish's Market Minute

Will the Russell 2000 (IWM) Break to New Highs?

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Recently, the small-cap index Russell 2000 (IWM) cleared $225. This was a main resistance level dating back to early August. Now that IWM had cleared resistance, will it make new highs?

One way we can judge the odds of IWM's continued rally is by checking its underlying momentum using MarketGauge's Real Motion indicator. While IWM has been trading near its 50-day moving average (Blue Line) for most of the year, the 50-DMA on momentum has been trending down.

Real Motion (dotted maroon line) has also shown weak momentum, as it has consistently stayed under the 50-DMA. Having said that, currently RM is close to clearing the 50-DMA. What makes this even more important is that the last time IWM attempted to clear its $225 resistance level in price, RM was not close to its 50-DMA. This showed a disconnect between price and RM. Now, RM is about to attempt a break of the moving average with price leading higher.  

If RM does clear the 50-DMA, this will greatly increase the chances IWM can break to new highs as it shows that momentum is following the price action. With that said, if RM does not clear the 50-DMA, this could be telling us that IWM could begin to struggle and may need more consolidation time before it is ready to push to new all-time highs.


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ETF Summary

  • S&P 500 (SPY): 447 support level.
  • Russell 2000 (IWM): Like this to hold over $227.
  • Dow (DIA): 356.60 high to clear. 351 support.
  • Nasdaq (QQQ): 375 support area.
  • KRE (Regional Banks): Needs to stay over the 50-DMA at 64.31.
  • SMH (Semiconductors): 263.86 minor support area.
  • IYT (Transportation): Watching for a bullish phase change over the 50-DMA at 255.47.
  • IBB (Biotechnology): Cleared minor resistance. Needs to hold 174.
  • XRT (Retail): Needs to get over 97 and hold.
  • Junk Bonds (JNK): Watching to stay over 50-DMA at 109.51.


Forrest Crist-Ruiz

MarketGauge.com

Assistant 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
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