Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
It is funny how the “news” fits the market’s need for news. The market is short term overbought – the small caps however are very overbought. I am using the IWM ETF below since stockcharts.com doesn’t show gaps properly on indexes – in this case the Russell 2000. We have two entire candles on the IWM outside the upper bollinger band. I went back through 2009 and I could not find a similar occurrence – there are partials (i.e. the R2K was partially over the upper BB the three days after Draghi said “whatever it takes” in late June/early July) but not a point where you had two full days where even the bottom of the candle is over the upper BB. Since I posted that comment on twitter an hour ago the IWM has fallen about 60 cents. Coincidence? I think not. If not this news there would be something that would cause this to rest.
Does this mean we are going to have a major selloff? It need not mean that. Heck we could gap up tomorrow on a “super duper” jobs report. It just means until there is some rest and we at least see the Bollinger band range envelop the index again it’s tough to make a lot of upside progress. And risk reward is skewing away from reward in the very short term.
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