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Russell 2000 Index ETF (IWM) is testing its 200-Day Moving Average (MA200)
Small-cap stocks have had a rough year as the IWM is only up 3% while the S&P 500 and Nasdaq 100 are each up 13% and 33% respectively.
For the first time since November 2022, the IWM is starting to see its 50-day moving average (MA50) inch higher. This puts the small-cap index in the position of potentially moving into an intermediate-term bullish trend if it can sustain prices above its MA200.
While June is a weak seasonality month for the market - especially after a strong March, April, and May - the IWM may be able to build some strength through the month as we head towards the seasonally strong July.
IWM shares are starting the day trading slightly lower only to catapult into the green by more than two percent on strength from a few of the market's worst-performing sectors including the Banks, Regional Banks, and Retail sectors.
Turning back to the IWM, the move above the MA200 signals a possible bullish breakout (Yes, A bullish signal being touted by what some of you might call a perma-bear).
This would be the first in more than six months, signaling that the market's rally - which has been fueled by a small group of large-cap technology stocks - is about to gain some healthy breadth.
The primary target for this bullish (yes, I said bullish) move in the IWM is almost 7% higher than current prices at $195 based on the technicals leading to the February highs.
But, there's a catch.
The current open interest configuration for the June expiration IWM options holds some resistance at $180 and above. This resistance is the result of large call open interest strikes that start at the $180 price, continuing to $185 and $190 as pictured below:
These strongholds of call open interest often slow a stock or index's progress as they serve to identify the market's upside targets and thus a level that we're more likely to see profit-taking increase.
For now, it appears that this rally is shifting to being driven by healthier breadth and risk-taking as the market begins to participate in the "risk-on" trade.
SPDR S&P Regional Banking ETF (KRE)
If the market is going to climb a Wall of Worry the Banks are the next sector to move higher.
Regional Banks are making a strong showing in today's rally as investors are getting more comfortable with the economic outlook.
Over the past two weeks, we've seen several analysts lower their expectations for a hard landing, despite several data points indicating that a slowdown is still developing.
From a technical standpoint, KRE has gained monumental ground over the last two weeks as the percentage of stocks within the ETF has shifted from under to over 50%, indicating a rising tide that is starting to lift the entire sector.
Analysts backed off the sector in March with several downgrades,…
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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 Penny Hawk. He also contributes to Money Morning as the Quant Analysis Specialist.