Objective IWM Outlook - May 31, 2012

IWM is sitting on the flat 5-day VWAP (76.36) and still trading above the Weekly pivot (76.01). There are two massively strong support clusters in play just below Wednesday’s close and a void of resistance up to Weekly R1 (77.61). This background gives a mildly bullish bias for a retest of Tuesday’s opening highs. It is also supported by the IWM robot edges allowing a secondary buy entry at a limit of 76.24 today. The trailing stop of the initial long position (75.02) is conveniently located at a decisive breakdown of the 200-day moving average (75.51). This is certainly not the trade of the century and feels counter-intuitive to the general market mood; nevertheless it offers an objective positive reward/risk outlook.

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The GDX robot still finds no edge for opening a position. The resilience of GDX is increasingly outstanding. It briefly undercut its uptrend support line before raging ahead to retest the famous Yearly/Semester S1 (44.77) resistance where it stalled. The PM MF was strong for the day albeit in much overbought territory. My suggested discretionary EOD stop at Weekly pivot (43.83) remains valid and yesterday’s action is a good reason why it shouldn’t be used as an intraday stop. The key progress to make is now to conquer decisively the YS1/SS1 (44.77) confluence before attacking the second confluence of Quarterly S1 (45.75) with the 50-day moving average (45.76). Altogether, it will be a powerful resistance cluster to beat and the ETF will normally tend to consolidate some more before a final assault. Repetitive failures might lead to a short signal from overbought.
Billy

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