The updated 30-minute IWM chart, ETF for the Russell 2000 small cap index which we looked at last week, shows the potential head and shoulders topping pattern (purple lines) dating back to mid-July starting to confirm lower today.
However, we all know the caveat by now–The market has been in melt-up mode this year and most bearish patterns have failed miserably, if not laughably, via sharp V-shaped rallies to new highs. That, perhaps, may not change until The Fed takes away the punch bowl or some crisis strikes. Or maybe those are red herrings and the market will change when it wants to change, regardless of external events.
Either way, the main point here is to watch the $103.30 level on this backtest to the “neckline” of the pattern (light blue line) to see if bears can defend it and reject prices lower. Above there, and the case for another furious rally can be made.
I am not in a rush to add exposure here, long or short. I still have my core positions on inside 12631, including short Home Depot.
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