The Weakest Link, IWM Hits the 10% Correction Mark

Just before Noon yesterday (10/10/18) with IWM trading just beneath 159.00, this is what we discussed:

IWM-- following our bearish technical Script. This is what we discussed after the close last evening:

... the attached IWM chart, which we have been watching closely for the past two weeks. IWM has led all the major market index ETFs on the downside, and has plunged 7.5% from a new all-time high on 8/31/18 to yesterday's low. The decline has made a relatively rapid B-line right to the 200 DMA, which has managed to contain the weakness for the past three sessions.

Although the 200 DMA has dammed the flood of capital out of IWM, the price structure has failed to pivot off of the MA with any measure of power that is needed to imbue buyers or prospective buyers with confidence that the worst is behind us.

After three sessions, my sense is that IWM is running out of time to ricochet to the upside above the sharply declining 5 DMA (162.98). If such a ricochet does not emerge in the next day or so, the dam will be in jeopardy of breaking, and IWM flood waters will resume their cascade to the next dammed location, somewhere in the vicinity of 152.50, creating the potential for a 12% correction off of the high, which surely will get the attention of the other major market index ETFs.

Today's weakness has blasted beneath the 200 DMA, and has sent the IWM price structure towards my next target zone of 152-155... Last is 158.96/97

Fast-forward to this morning's action (10/11/18), and we see that IWM has careened lower-still, to a new corrective low at 155.00, in the upper portion of our next downside target window of 152.50-155.00. Thus far, IWM has pressed to a 10.6% correction off of its 8/31 all-time high at 173.39. Let's also notice that IWM is trading 3% beneath its 200 DMA, which provides plenty of room for a period of digestion beneath the 200 DMA prior to a resumption of weakness-- in the event IWM embarks on a rally in the upcoming hours. A break beneath 152.50 will leave IWM vulnerable to downside continuation into the 143-147 target zone, making for a 15% to 17% correction at the next lower target zone. Last is 156.46/48

10 11 18 IWM 1 GIF
10 11 18 IWM 1 GIF

  • Action-Oriented Trade Set-Ups in Stocks & ETFs
  • Macro Analysis of the Broader Markets
  • Detailed Technical Guidance for each Trading Idea
  • Live Interaction w/ Mike & Our Member Community
  • And Much, Much More!
Join Now! - Special Offer!
Veteran Wall Street analyst and financial author, Mike provides detailed and timely analysis and trade set-ups on a range of markets. Read more...

Have Mike's “Out Front” morning analysis delivered FREE to your email inbox twice weekly!