The Thriller Goes On - May 4, 2012

On a day of heavy selling, IWM found support at the quarterly pivot (80.28). This level will matter more than the 50-day moving average (81.54) for the direction of the remainder of the second quarter. The ETF is tactically positioned to either launch a new rally attempt or a new selling wave after the employment report this Friday and the reaction to the French election next Monday. This is a fifty-fifty proposition at best and the IWM robot is voting for avoiding any new positions, while the 20 DMF hesitates between turning positive or negative.

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The bears took no prisoners yesterday in the GDX collapse. The warning signs of a new lower high/lower low pattern coinciding with a failure of the Quarterly S1 (45.75) came to fruition. It was further exacerbated with the slicing of the dual Yearly and Semester S1 (44.77) and only Monthly S1 (43.46) could stop the carnage. Don’t ask me why this ETF is in such a mess and so much hated by investors, I have no clue. But it is behaving emotional for sure and is approaching extreme oversold levels. The Precious metals MF turned short but I certainly don’t want to enter a short position after such a blood bath. I don’t want to try a counter-trend long trade neither with such massive resistance above. And the GDX robot confirms objectively to stay in cash.

The RT Model needs to hit the oversold level of -1.45% or the average MF + porosity (0.100% today) for triggering a buy signal.
Billy

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Looking at a weekly chart of IWM back to 2002 there is a 10 year trendline that is being challenged.
The points it hits are the 10/7/02, 3/10/03 lows and the 10/24/11 high. We have penetrated it twice recently - the 4/9/12 weekly low at 78.14 and 78.31 the week of 4/23. The close of both weeks was above the line. A close below this line would be very significant for more than the short term.
Best regards,
Robert

I checked the drop in IWM from the trendline break to the low and got these numbers. They are approximate, but you will get the flavor.
9/08 44.74%
5/10 16.2%
8/11 20.93%

Robert