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 highly regarded equity and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of data points into impressive gains for clients.
At heart Chris is a quant - like the "rocket scientists" of investing - with a specialty in applying advanced mathematics like stochastic calculus, linear algebra, differential equations, and statistics to Wall Street's data-rich environment.
He began building his proprietary models in 1998, analyzing about 2,000 records per day. Today, that database, which Chris designed and coded from scratch, analyzes a staggering 700,000 records per day. It's the secret behind his track record.
Chris holds degrees in finance, statistics, and accounting. He worked as a licensed broker for 11 years before taking on the role of Director of Quantitative Analysis at a big-name equity and options research firm for eight years. He recently served as Director of Research of a Cleveland-based investment firm responsible for hundreds of millions in AUM. He is also the Founder/CIO of ETF Advisory Research Partners since 2007, noted for its groundbreaking work in Behavioral Valuation systems. Their research is widely read by leaders in the RIA business.
Chris is ranked in the top 99.3% of financial bloggers and top 98.6% of overall experts by TipRanks, the track record registry of financial analysts dating back to January 2009.
He is a frequent commentator on financial markets for CNBC, Fox, Bloomberg TV, and CBS Radio and has been featured in Barron's, USA Today, Newsweek, and The Wall Street Journal, and numerous books.
Today, Chris is the editor of Night Trader and Strikepoint Trader and contributes to Money Morning as the Quant Analysis Specialist.