One Of Our Favorite Market Indicators Is Talking To Us Again

David Frost // Market Outlook


November 13  

The market will go up until it doesn’t.

Crude Oil will go down until it doesn’t.

The Russell 2000 Index or the IWM will continue to be a leading market indicator until it’s not.

Today, the IWM seems to be back and as you know is one of my favorite market “tells.”  The index was down considerably in comparison to the SPX, DOW and Nasdaq Composite.  The Russell 2000 index was down almost 1% and put in what we call in the business a “reversal day.”  While it’s not the best and cleanest reversal day we’ve ever seen, mainly because the volume wasn’t too heavy, and we didn’t close below the low from yesterday, but it has the makings of a larger move on the horizon.  It’s a wait and see, but something to watch nevertheless.

I’ve been discussing in these pages the unbelievable upward trajectory the market has taken since the bottom on October 15.  More specifically, the S&P 500 is up on about a 75 degree angle over the last several weeks which is completely unsustainable.  We can certainly go higher, but in order for the market to continue achieving higher prices we will need to see at least a modest pull back to work off some of this over bought condition.

Looking back about as far as you can go, it’s impossible to find a time frame where the index sustained a move like we’re seeing at the current trajectory.

While I understand the euphoria and the amount of pundits that want you to believe it’s clear sailing from here, we still need a pull back.

However, on the flip side, the volume and power the market went up from mid October can’t be ignored, and most likely means higher prices are coming into next year – but once again, not before a correction.  (Don’t look for a massive correction right now, just a pull back)

Crude oil continues down and is basically at my target of $74 per barrel.

The gold market is stuck at current levels, and my analysis still indicates we should see one more move down before putting in a meaningful bottom, but we’re close.

Tune into the video below for a full analysis.

About the Author

Trading and investing in markets is second nature to some, but a mystery to others. The goal is to provide a forum where everyday people aspiring to be part time or full time traders will learn how view markets differently and profit beyond their wildest dreams.

David Frost