Tuesday, February 12, 2013

Ending Diagonal in IWM - This May Be "The Top"

IWM 30 Min

IWM is now displaying a larger potential ending diagonal triangle than the one I had recently mentioned and had suggested would likely lead to new highs.

Notice the current sharp bearish divergence in the 30 min MACD.  That is a nice signal in a wedging pattern.  However in context of a daily time frame MACD which also has bearish divergence in extreme overbought region, it creates a nice dual time frame set-up to potentially play for a larger move.

88.69 would be the minimum target on IWM if this is an ending diagonal and the MACD turns into a sell.

IWM Daily

Record net short position by commercial Russell 2000 futures traders and record net long by large speculators shows the extreme "bubble" which this market is experiencing.  Additionally, Hulbert Financial Digest reports that newsletter writers are recommending about the same long exposure to the Nasdaq as they were at the peak of the tech bubble, with only that reading exceeding the current one.

So it is time to look to the short side of the market on a longer term basis here.