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Mish's Daily: Regarding IWM: Classic Signs of a Bottom

February 11, 2016

By Mish Schneider

Cupid, draw back your bow…-Sam Cooke

A song from a simpler time, but not really simpler. Just perceived as simpler because information came to us through our radios and only once each night on the evening news.

Actually, although a time of economic prosperity, domestically, America had great conflicts primarily with civil rights and internationally, mainly with the Cold War.

That’s then. This is now. I’ve no interest in debating whether 2016 is worse, the same or better than 1961.

I will say however, the bearish cycle we find ourselves in now and the speed and amount of information we are privy to does make many I speak to long for the perceived simpler times of the late ‘50’s, early ‘60’s.

That’s why it seems more important than ever we all step back and look at the big picture. On one end you have the media who loves a doomsday picture. On the other, you have the traders, who every time the market rallies for more than 15 minutes, claim the bottom is in.

I say we are not at either end, doomsday or the bottom. Opportunities are always around. Or as my mom might say, “This too shall pass.”

Hopefully, I’ve helped you take precautions with my Daily using words like, “16 Chart Patterns: Why They Do Not Say Bottom.” Or, “Gold and Gold Miners: Read the Tape!”

Late in the session, OPEC claimed they are ready to cooperate on cuts. Incredulous at best, the market saw some buying. That got me thinking, time to write the criteria for a bottom.

Classic Signs of a Bottom-Regarding the Russell 2000 (IWM)

Island bottom-would have to gap lower and then the next day gap higher and not fill that gap.

A blow off bottom-depicted with at least double the average daily volume onto new lows. We have had good volume but not double the average.

A new 60+ day low-followed by a close in the upper 25% of the intraday trading range, which must confirm the following day with a move and close above that level. Hasn’t happened since last October which gave us a decent rally.

Double and Triple Bottoms-not seeing that yet either

Phase change-to Recovery with acceleration, confirmation and volume-nope.

“Cupid, please hear bulls cry.
And let your arrow fly,
Straight to a rally’s heart for me…”

S&P 500 (SPY) Amazing how the giant head and shoulders top with the neckline break under 181ish held today. Only a move over 195 will save this from that formation. Subscribers: Negative pivots in all

Russell 2000 (IWM) Friday, ahead of a 3-day weekend anything can happen.

Dow (DIA) Broke the 6-month JCRL and the 200 weekly moving average

Nasdaq (QQQ) Never broke under 94 which would be another kiss of death for this

XLF (Financials) 18.25 best underlying support-over 21 would mean miracles can happen

KRE (Regional Banks) 31.27 the major monthly moving average support

SMH (Semiconductors) Holding August low and the 200 WMA at 44.10 so far

IYT (Transportation) 128 is the 200 week moving average. Want to see it close above there this week to get even remotely happy.

IBB (Biotechnology) Holding the 200 week moving average at 239.40.

XRT (Retail) Still under the 6-month JCRL but very very close at 38.65-watch here

GLD (Gold Trust) 117 pivotal and who knows where it can go..

GDX (Gold Miners) Nice move and not overbought

USO (US Oil Fund) This could be one of those classic bottoms I wrote about above. Now it needs to confirm

TAN (Guggenheim Solar Energy) I had a target of 20.00. Got to 20.05-watching

TLT (iShares 20+ Year Treasuries) Probably a good time to take profits and dramatically raise your stop if long

UUP (Dollar Bull) Expect to see an eventual move down to around 24.20