Have microcap exchange traded funds (ETFs) found the elusive bottom in what is a seemingly bottomless pit?

Recent selloffs in the markets have diminished iShares Russell Microcap Index Fund (IWC), leaving it more than 50% off its high of June 2007 , according to Microcap Speculator for Seeking Alpha. Who knows if it could get better or get worse?

But Microcap Speculator makes the case that the selloff has reached a turning point citing the following reasons:

  • Initial market fears showed traders willing to get out at any cost or they were forced to sell due to margin calls. Most who considered selling have already done so. So new buyers have a lower cost basis and are more likely to weather the tumultous fluctuations of the current market.
  • Since the index has gone far below its 50-week moving average, a sign of it being severely oversold, the index’s odds that there will be a sharp move upwards are very high.
  • Lastly, November and January are historically strong months for microcaps. Taking into consideration recent volumes of selling, December, a traditionally negative microcap month, may be this years exceptioni.

IWC is down 43.8% year-to-date. As always we’ll wait for the trend to show up before considering an ETF, and this one is down 20.8% from its 50-day moving average, and 33.4% below its 200-day.

ETF IWC Performance Chart

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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