IWM Russel 2000 - No Love For Small CapsI hadn't really looked at IWM until a follower asked me about it on Twitter, and after thinking about it for a few hours and comparing it against SPY and QQQ, I realized that it's not that IWM is lagging, it's that it's not going to follow the recent mania.
Some wisdom I heard recently is that breadth is important in markets because it indicates a large amount of liquidity has entered or left, indicating the emergence of new bull and bear markets.
Unfortunately, with the exception of Friday alone, breadth has been terrible in this debt ceiling crisis pump, which means even though Nasdaq is flirting with 15,000 and SPX with 4,300, it's a bullish impulse within bearish macro conditions.
There's a lot of trouble on the horizon with the 2024 Presidential Election close enough that the game has to played and the trouble brewing in mainland China with the Communist Party being about to fall and the globalist bloc struggling to either cuckold or depose Xi Jinping.
What a bullish impulse in a bearish macro framework means for small caps is that although Microsoft, Nvidia, Google, Tesla, Amazon, Apple might pump, liquidity is not going to be going "risk on" on small caps and zombie corporations.
Instead, prices will be driven lower because as they sell the cycle highs in the blue chips, they'll be bidding a portion of their profits with lowball asks on small caps for the purposes of pumping them, and then dumping them, on retail's head after interest in the big names has become exhausted.
Those very large lowball asks will lead the algorithms to drive price towards them because the algo is designed to generate volume.
But on small caps, unless the company has significantly exceptional fundamentals, your expectations on how high it can go and how long it can go for during a reversal will have to be quite reserved.
In other words, if you missed the July '20 to October '22 pump on IWM then you missed the train and it's never coming back.
It is what it is. Just accept it.
You can make a lot of money trading puts on this thing on the way down.
It just means that if it really does bounce around $125, your expectation for where it can bounce to shouldn't be a new ATH, but probably back to $170.
Again, you can make a lot of money trading calls from $125 to $170.
But if you want to bUy tEh bOtToM fOr thE mOaSS and think you're going to get a 50 bagger instead of a "tiny little" 5 bagger, you're going to blow your account.
And if that's who you are, it's probably better you blow your account and go back to working a real job and learn the value of money again.
So here's the trade.
This recent breakout looks like it's just a consolidation squeeze. It's going down. But it might screw around for a while and could be as annoying as trading over $200 again. It's really hard to say.
Areas you'd really like to short and/or buy puts are called $188 or $190.
You'll need 4-6 months or so to get to the $127 level.
But either way, the R/R on a $188 short with a $212 stop and a $130 target is almost 7 to 1.
Go do sports betting for a while and enlighten to how hard it is to hit a +700 if you don't think that's a worthwhile trade.
You need to quit wanting to get rich quick. Getting rich isn't important and it isn't even valuable. What you need is to wake up to what's important in life and what you're really here to do.
And that question is answered in mankind's traditions and that 5,000 year old culture sitting in Mainland China after the CCP is utterly annihilated.
