I always find the inverse ETF’s helpful in trying to figure out if the regular ETF is a buy, hold, or sell. Since I’ve been looking at IWM a lot lately, I thought I’d look at TWM for clues to the bigger picture. One thing the chart of TWM is telling me is why bother? How the hell can you trade a stock that looks like that?
I just don’t see anything to like about this chart and the negative divergence in the OBV may be the tell. The Fib-based Bollinger Bands I’m using on this chart have expanded probably a little too far apart and suggest a cooling off period/consolidation of some type for TWM may be at hand. The Aroon Oscillator, not shown, hit 88 early this past week and TWM has often pulled back after such a reading.
Daily chart of IWM showing a failure of the 5EMA to cross above the 10EMA, but it’s close. IWM will need to close above Friday’s high of 67.61 early in the week and if it does then it may make a run for the 50MA and break out of this falling price channel. The W pattern in the Sto begs for an A leg which, if it does in fact happen, would not necessarily mean much price destruction but just a pause. The Aroon Oscillator, not shown, dropped to -92 on Tuesday and IWM has bounced for more than four days out of readings that low so there is certainly potential for more upside.
I’m not as bullish about IWM as I might sound, but if IWM should perform half as well next week as it did this past week then I might consider and long position via UWM or TNA. But I’m not doing anything yet.
One of the main reasons I can’t get too excited about the markets right now is the weekly chart of the $SPX. After having lost about 84pts in the previous two weeks, last week’s gain of 24pts isn’t that impressive. In the daily chart there is the same pattern we’ve seen over and over again since August 8th: spike the market up for a few days, draw the suckers in, and then sell it off hard. My chosen MA’s all moved down again this week and this continues to follow the pattern of the 2007 decline. With the Sto having dropped below 20 the market is definitely oversold so there is the potential for gains next week. If we do end the week in the green this coming week, then that would stop the descent of the 52MA and might even turn the 13MA, and that would have to be seen as positive going forward.
Charts courtesy of StockCharts.com
For the moment I’m going to hold on to my current long holdings and continue to watch from the cheap seats.
Gl in the week ahead.