IWM in Consolidation
Posted on March 16, 2012 at 15:25 PM EDT
Purely from a technical perspective, let's notice that the iShares Russell 2000 (IWM) has been in a 6-week high-level consolidation pattern and is threatening to break out to the upside. The question is whether or not it will do so and whether it will follow through to the upside into a new up-leg. What is equally interesting, however, is what happened to the IWM during the Oct-Dec timeframe when the price structure carved out a similar but larger consolidation area that initially failed to break out and instead slid into a 6.6% correction prior to the resumption of strength. Right now, I have no reason to expect the IWM to fail to hurdle its Feb 17 high at 83.31, although I do have my suspicions about its sustainability thereafter. Both the pattern similarities with last December and its severely under-performing daily momentum gauge make me think "show me" about further upside in IWM. In the absence of an upside breakout, a decline that breaks 82.00 will argue that a December-like scenario may well be unfolding. Top three IWM holdings are Nu Skin Enterprises (NUS), Parametric Technology Corp (PMTC) and Clean Harbors, Inc. (CLH).
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