Is IWM's Correction Complete?
By
Mike Paulenoff
Good Wednesday Morning, MPTraders! January 17, 2024-- Pre-Market Update: IWM (Small Cap Russell 2000 ETF) is on my mind this morning. Is the 8.5% correction from the 12/28/23 high complete?
Just over 1 week ago, with IWM trading at 194.72, this is what we discussed about IWM (Small Cap Russell 2000 ETF):
If IWM cooperates and climbs into the 199.50-201.50 target zone, I am expecting the index to run out of gas and roll over into a secondary corrective down leg that retests and breaks below 190.57, pressing into the 186.50-188.50 target zone to complete the larger correction off of the 12/28/23 high at 205.03... In the event, IWM fails to take out yest's high at 197.02 and nosedives beneath 190.57 (1/05/24 low), the secondary down leg already is in progress... In other words, anyone long IWM here should treat it as a short-term "rental" ahead of another bout of weakness... last is 194.72...
Fast-forward to this AM, we find IWM in pre-market trading hit a low of 188.08 after rolling over from 197.10 last week (see my attached 4-hour chart), which has pressed the ETF into my optimal corrective target zone of 186.50 to 188.50 discussed above. It is from this Target Window that my pattern work is looking for signs of corrective exhaustion and a technical upside reversal signal.
My Big Picture pattern work (see my attached Daily Chart) argues strongly that the upleg from the 10/27/23 low at 161.67 to the 12/28/23 high at 205.56 exhibits bullish form, and as such, informs me that current weakness represents a Window of Opportunity to enter and/or to add to long positions
In the upcoming hours/days, from an intraday, granular technical view, a climb above 190.30/40 will trigger a preliminary warning signal that IWM is exhausted on the downside, but thereafter, upside follow-through above 191.50 is needed to add more technical confidence to a forthcoming upside reversal into a new upeg. In the absence of an initial climb above 190.30/40, the IWM bears will remain in near-term directional control... Last is 188.33
