The big indexes are trading at just about the same levels they were three weeks ago.
My experience tells me this means the market is at a tipping point as it searches for an ultimate direction. Seasonality and sector rotation are in play right now – as I've been saying for the past few weeks.
Change is in the air; market leadership is changing hands.
My job is to make sure you're on the right side – now, and when the "flip" happens…
This Bullish Old Standby Seems to Be Running Out of Gas
Small caps, as tracked by the iShares Russell 2000 ETF (NYSE Arca: IWM), are struggling. That's significant as we previously cited small-cap outperformance as an indicator of the bullish risk-on trade being in force. But that "on" is now in jeopardy…
The chart below shows that the IWM is in the process of posting the third in a series of lower highs since early July.
The bottom line: IWM needs to move above $170, its record high, to break this downward pattern and confirm that the risk-on trade is still potentially in play.
About the Author
Chris Johnson is a quant - he's obsessed with building and perfecting mathematical models that allow him to predict, with startling accuracy, the direction of the markets, entire sectors, and individual securities. For the last year, he's been researching and building a new system that lets him move swiftly in and out of the hottest stocks in the market for life-changing gains - entirely on his own terms. The results of his newly-minted Night Trader system are nothing short of amazing.
Chris also contributes to Money Morning as the Quant Analysis Specialist.