Wait Just a Minute Before You Push That “Buy” Button…

I know how you feel. No, seriously… I KNOW HOW YOU FEEL.

Like 90% of investors, you’ve watched the market shoot higher after the last two days, and you’re probably thinking that you need to move every penny from your money market into stocks before you get left behind for good. We call it FOMO.

Don’t do it.

I’m a numbers guy, and the numbers tell me that we’re going to see a little cooling of the markets before the next 5% move. Let’s look at the Small Cap Russell 2000 Index ETF (IWM). Here’s the numbers…

The Russell 2000 Index ETF shot higher by more than 6% in the last two days. That’s only happened 38 times since 2000.  That amounts to 0.7% of the trading days, which makes it a rare event.

Here’s a quick summary of what happened in the market after those 38 “signals.”

• On average, the IWM turned in flat performances in the ten days following similar rallies.
• The best performance was in March 2020, after the initial pandemic crash.
• The worst performance was in November 2008, emerging from the housing bubble crash.
• There is a stronger bias to the negative return bias. This makes sense as “traders” are more likely to take the opportunity to “sell into short-term strength.”