Test of repeating bearish patterns awaits in key week
In last week’s column I said that small-cap stocks finally had more upside potential than downside risk. It’s a good thing I said it last week since it would carry significantly less punch now that we’re 70 handles higher. Everyone in the general financial press was gushing about how last week marked the best performance in the stock market since the Great Depression. You know what both markets had in common? They were both so shell-shocked and beaten down that a big percentage move was much easier.
My point here isn’t to play down last week’s move extension from the lows. I just want to put everything in perspective as the market strives to snap free of recent repeating bearish behavior patterns on an important data (and speaker) agenda this week. If some of you look at the daily chart studies and feel like you’re getting flashbacks, you’re right on target. Last week’s recovery move may have been historic, but it sure looks just like the one we saw back on Oct. 28 when the market was rallying off a bullish reversal from new bear market lows. Alas, back then the market stalled out and made new lows, and until we see a dynamic push through previous highs we are still in a volatile and heartbreaking pattern of making new lower lows and stalling at lower highs.
We can break at least part of that bearish pattern behavior this week. All the Russell 2000 (NYSE:IWM) needs to do is tack on a measly 19 handles or so to Friday’s closing price and we will push above a previous bounce high for the first time since this collapse began back in September. Just so it’s easy to track this test on your own – if the Russell climbs above 491.24, it will bust through the previous correction highs and finally stop this painful process of lower lows and lower highs.
And here’s another way we can start to smash these repetitive bearish patterns: we haven’t seen two consecutive green candles on weekly studies since the . . .
My point here isn’t to play down last week’s move extension from the lows. I just want to put everything in perspective as the market strives to snap free of recent repeating bearish behavior patterns on an important data (and speaker) agenda this week. If some of you look at the daily chart studies and feel like you’re getting flashbacks, you’re right on target. Last week’s recovery move may have been historic, but it sure looks just like the one we saw back on Oct. 28 when the market was rallying off a bullish reversal from new bear market lows. Alas, back then the market stalled out and made new lows, and until we see a dynamic push through previous highs we are still in a volatile and heartbreaking pattern of making new lower lows and stalling at lower highs.
We can break at least part of that bearish pattern behavior this week. All the Russell 2000 (NYSE:IWM) needs to do is tack on a measly 19 handles or so to Friday’s closing price and we will push above a previous bounce high for the first time since this collapse began back in September. Just so it’s easy to track this test on your own – if the Russell climbs above 491.24, it will bust through the previous correction highs and finally stop this painful process of lower lows and lower highs.
And here’s another way we can start to smash these repetitive bearish patterns: we haven’t seen two consecutive green candles on weekly studies since the . . .
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