IWM Downtrend Channel

The IWM is now in a bearish downtrend channel which is marked with red lines on this 60-minute chart (click to enlarge):

In the lower panel of the chart, I have added a slow-stochastic indicator. So, as you can see, IWM’s stochastic had been in oversold territory for three days and was due to unwind. The beginning of that process was signaled by the exhaustion-gap reversal pattern (blue box) on Tuesday morning.

And now, IWM’s stochastic is oversold. Will it be able to use that oversold condition to pop up and out of the channel? Or will it stay oversold for an extended period just like it stayed overbought on the way up?

A bearish attitude is appropriate until the gamblers come back to the small-cap casino, and the IWM busts out of this channel.

56 thoughts on “IWM Downtrend Channel

  1. Matt, couldn’t this down channel just be considered a bull flag since it is just overlapping? Like you pointed out, a break of the channel is bullish.

  2. 2th,

    Good point. It could indeed be a bull flag on a wider time-scale – especially since volume declined during Wednesday’s selling, which is a classic sign of a flag. Volume declined for SPY, QQQQ, IWM, XLF, DIA, XME, and EEM. Only SMH had an increase amongst the major ETF’s that I track.


  3. Run; Hold; Unload at target, be it today or later. Re-up into something else or more of the same. Shortcuts can slow you down – JJ. 🙂

  4. The unemployment-claims report at 8:30am showed improvement, and IWM has moved up to the top of the trend channel shown on the chart above in pre-market trading.

  5. True definition of “nimble” Mitch! 😀

    “Float like a butterfly, sting like a bee.” (Muhammad Ali)

  6. Still too much bearish sentiment for the market to drop significantly. Most newsletters are getting even more bearish as time goes by based upon debt (to paraphrase Carville, it’s the debt, stupid). Now with war getting closer in the Middle East, the market is climbing that “wall of worry”.

    And to put that into Stringmese: I’m like a hog with a ring in my nose; I’ll follow the market anywhere it pulls me. 😀


    i agree ….too much bearishness in the face of strong market internals…that is a recipie for UPWARD EXPLOSION…maybe not at this moment because we could be looking at wave 5 up here..any dip is a buy opportunity for the real rocket ride up later to MARS and beyond..

    TAKING PROFITS on gap up open on 1/2 SCHX bought @ spx 1105 late yesterday in case this is wave B or 5….will evaluate how strong market is later….

  8. Let’s see if SRS can make a new all-time low today. The inverse is getting juiced up. Can’t wait!

  9. 2 TH

    took partial profits on large TBT position…still 60% long TBT… looking to add back on any bond rally

  10. Thanks Phil for the info, I’m staying away from the bonds though for now.

    Looks like we are backtesting the channel lines on the 60-min chart. do or die time.

  11. Okay. And gaps nearing the fill mark. SPY broke out on that 5min I posted and is now below it. The 15min did not get a 9/36/15 on that bounce but could find support on the 9MA.

  12. phil says:
    July 29, 2010 at 10:08 am

    possible C wave down on futures now….will buy back on stock plunge

    DEFINITE …….C wave down in force……looking for initial rebuy

  13. Wow, Cisco tripped the circuit breaker to the upside…no sellers?!?

    SAN FRANCISCO (MarketWatch) — Shares of Cisco Systems Inc. were halted briefly Thursday after a jump up toward $26 tripped a circuit breaker, according to Nasdaq OMX. Trading was halted at 10:41 a.m. Eastern time, and resumed at 10:46 a.m. Nasdaq reported a pause threshold share price of $25.6960 for Cisco. Shares of Cisco were flat at $23.39 in recent activity.

    Settled at $23.28 as I write this….hmmmm, very interesting.

  14. Broke even on SDS bought last Friday at 1097. Holding just a mild short position in trading account and mostly cash again. We’ll see if 1089 holds and go from there.

  15. Phil, looks like wave 4 is going to test the 5-min 36 MA in a simple zig-zag, then bring on wave 5 to test 1089.

  16. P, for me, yes, I did better than I normally do. Breaking even on a poorly timed SDS trade was nice. When you’re yelling, you should be selling….so I did!

    I’ll wait for GDP to help me make a decision, as well as month end on Molarvision. Golf tomorrow AM.

  17. Big time selling into the close. Exact opposite of yesterday’s close Joan…big sellers stepping in over the last few minutes. They correctly found the gap up in the AM today. Will they correctly indicate a gap lower tomorrow?

  18. Here’s SPY’s weekly. It is attempting a backtest of the 36MA resistance. Price has gone over, then backed off. The week isn’t over of course, and it could be another week or two before this is resolved. Either way, a good breakout is coming.


  19. I said last night to be on TWM like a “Chicken on a June Bug” if it failed the 36MA. I was long this morning IWM. On the gap up I was wanting out, it had fooled me once yesterday. Fool me once shame on you, fool me twice shame on me! Gapped up and got below the Open Signal, and I was history. When it went below the 36MA I was in TWM. The hammer confirmation got me back flat at 12:40.

    Then it went back and tested the 21MA and failed, and is still below the 36MA. It looks like it wants to fall! Beats the heck out of me, but with GDP in the morning I decided flat was the place to be. If 1085 fails on SPX I would be more aggressive on the defensive.

    I know this was extremely important for all of you, so I just had to post! Have a good evening.

    Rangers are up 2-1, Go Rangers. If they make the playoffs remind me to tell you my Texan in Hell joke!


  20. What I don’t show on the chart is the 50MA, it is below for support. So if it fails that you can get a little more pumped. But, then it could fail just for a bar or two, and some news of the Fed putting ATM machines on every street corner that issues G notes for free, and there you’ll be.


    I would rather be lucky than good any day!!

  21. What I failed to mention was it has failed the 21MA twiest (Texan for twice!). Also, the 21MA on the first failure, was higher than the last failure! Hmmm!

    Sleep tight, and don’t let the bed bugs bite!


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