Last night after the sell off, we had this to say:
“For junk bonds and small caps, the next day or two will be very telling on whether this a buyable dip, or the start of a bigger correction.”
We also wrote 4 scenarios that could help you decide next moves:
- HYG holds these lows and works its way back to 77.00 or the 50-DMA. A close above would be considered strong. (NOT QUITE BUT CLOSE)
- A move under today’s lows in HYG, regardless of what IWM is doing, we would think a bigger correction is coming. (DID NOT HAPPEN)
- IWM, which failed to hold above the January calendar range high and is not that far under the 50-DMA, clears and holds back above 195. Even if HYG just consolidates, we would consider this a positive for the small caps and market. (YAY-THAT HAPPENED)
- IWM cannot clear back above 195 and confirms a caution phase, which will lead us to wait for a test of 185 before buying anything new. (HAPPY VALENTINE’S DAY-IWM HELD)
Furthermore, we noted that Granny Retail XRT did better yesterday and Transportation, IYT held 266. Granny Retail rose about 1.5%.
IYT ran up 3.5%-hard to argue with strong transports!
As you can see from the chart, Granddad Russell IWM did its job for today.
Please have a listen to the Final Bar with Dave Keller to hear our thoughts on these relationships and what has to happen from here.
Find Final Bar https://www.youtube.com/@StockChartsTV/videos to hear Dave’s wrap up and Mish’s thoughts on these four key instruments.
Twitter: @marketminute
The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.
