The Russell 2000 Walks with a Cane Cholla

June 18, 2018

Mish's Daily

By Mish Schneider


Known as the cane or walking stick flower, this Cane Cholla contrasts beautifully against the prickly spines of the cactus plant.

Although one might be inclined to put one’s face up to the flower, the needle-sharp spines on the plant can be a painful reminder that if touched, they will detach easily into one’s skin.

Those spines are painful and hard to remove.

The same is true about the current market.

The Russell 2000 (IWM) is like the market’s walking stick flower.

In fact, I could argue as Granddad of the economic Modern Family, he probably uses a cane, especially lately to keep himself above the fray.

Today, in the face of the declining Dow and a sea of red among all the other Family members, IWM did just that--bloomed to yet another new all-time high.

Ultimately, IWM closed on a new high.

Last Friday, IWM and Transportation (IYT) kept the market from falling apart.

Now again today, although IYT closed red, it and IWM continue to look like our Cane Chollas.

With so much underlying weakness mainly in Semiconductors, Biotechnology, and Emerging Markets, is Gramps merely an object of ephemeral beauty?

If I stand by my theory behind why I chose the Russell’s as the head of the US economic family, then IWM’s strength is not to be taken lightly.

Nor, would I underestimate the price action of IYT-hovering around $200.

Grandma Brick and Mortar Retail (XRT), did her part today as well, gaining nearly 1%.

What the Family reflects, is the strong US economy.

To that, there is no denying.

Nevertheless, the rising dollar, also a reflection of a strong economy, along with the promised couple of more rate hikes, can still damage the market’s luminary flowers.

In nature, flowers eventually fall off the plant and die.

Therefore, it’s really that simple.

Until we see IWM wilt, along with IYT and XRT, do stop and smell the cactus flowers.

However, do not lose sight of the thorny spines from whence those flowers sprung.

S&P 500 (SPY) 274.25 support held. So, if SPY is to follow IWM, then we must see it clear 277.50

Russell 2000 (IWM) I’m impressed. On another new all-time high, it also closed on one. Of course, we watch for signs of stress, but adjust our stops and risk/reward accordingly.

Dow (DIA) 246.75 area support to hold. 250 now pivotal resistance.

Nasdaq (QQQ) Good comeback from early morning weakness with 176 the pivotal area for Tuesday. Above good, below, stress.

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