The Russell 2000 Finally Breaks Out!
Updated
Since the turn of the New Year, bears have been calling for an end to this unstoppable rally. Everyone, including myself, seemingly wanted to short a bounce in the market and we all got crushed. Can you blame us? Volatility often begets volatility and it seemed that a recession was right on time with the current bull market's length reaching record territory. A recession, however, was not in the cards and the market went on to form a perfect V-bottom. With the S&P at all-time highs, the only hope of the bears was that the small and mid-cap stocks were lagging the pack and signaled devastation to come. This, however, seems not to be the case anymore with the Russell 2000 breaking the 1590 level today.
With a Fed that seems hellbent on overstimulating the economy, an administration that feels it needs a higher stock market to be re-elected, a majority of economists calling for a recession and a ton of money on the sidelines or in bonds after December's crash, I believe conditions are ripe for a melt-up over the next year. The chart above shows an inverse head-and-shoulders (also on the S&P) that, if it were to play out classically, would target 1913 in the Russell! That's 20% higher than here!
Putting my long-term view aside (as I am mostly a short-term trader), I believe we can play this breakout in the Russell for a short-term, low-risk, high-reward trade.
Buy the Russell (via IWM, or RTY E-mini's) @ 1604 or lower
Target 1: 1649
Target 2: 1700
Stop: 1583
With a Fed that seems hellbent on overstimulating the economy, an administration that feels it needs a higher stock market to be re-elected, a majority of economists calling for a recession and a ton of money on the sidelines or in bonds after December's crash, I believe conditions are ripe for a melt-up over the next year. The chart above shows an inverse head-and-shoulders (also on the S&P) that, if it were to play out classically, would target 1913 in the Russell! That's 20% higher than here!
Putting my long-term view aside (as I am mostly a short-term trader), I believe we can play this breakout in the Russell for a short-term, low-risk, high-reward trade.
Buy the Russell (via IWM, or RTY E-mini's) @ 1604 or lower
Target 1: 1649
Target 2: 1700
Stop: 1583
Trade closed: stop reached
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