Charts Say Small-Cap ETFs are Vulnerable

If the U.S. economy continues to expand, smaller companies may continue to outperform. In contrast, large-cap benchmarks, like the S&P 500, include more slow-growing multinationals, which may have seen weakened overseas revenue streams after the U.S. dollar strengthened.

“The bounce up from the price low of mid-January 2016 occurred in about the right place for a small fourth wave to begin, still inside the larger downward wave [iii]of the Russell 2000 decline. Now that the correction in both IWM is approaching standard retracement areas near 102.74-103.03 and perhaps higher near 105.56, it may be time for faster traders to start looking again for short entries. Initial downward price targets for wave (v) of [iii]include 94.13, 91.61, and 88.49, which suggests that anyone trading down toward those levels consider exiting in whole or in part as price reaches those general areas within the Russell 2000 decline,” adds See It Market.

iShares Russell 2000 ETF

Tom Lydon’s clients own shares of IWM.