Friday, May 16, 2014

Watch the Russell 2000

Yesterday I had a conversation with one of my market letter subscribers – who is an investment advisor – and he was worried about that Sell-in-May thing. Of course he knows a prudent investor would never sell out of a good portfolio just because it is May but if one is worried about various fundamental and technical issues – one could reduce and raise a little cash

I told him to watch the Russell 2000 - small-cap index or the clone ETF the IWM - which is the group of stocks that got us into this worried mode. The IWM peaked in early March and has since traced out a typical A-B-C type correction – also in the process slipping below the 200 day (or 40 week) simple moving average. We need to see if the IWM holds at the Feb 5 pivot low of about 107. If we fail here the next support on a P&F is 98 – if we hold and recover we need to get above the 200 day of about 110.50 to put out the fire

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