US Stock Markets Daily Recap: One Year From Stocks Bottom – FX Empire

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Figure 1- iShares Russell 2000 ETF (IWM)

I kicked myself for not calling BUY on the Russell after seeing a minor downturn during the second half of February. I also realized I may have broken my own rule about “not timing the market.” I’ve wanted to buy the Russell 2000 forever but never thought it dipped hard enough (whenever it did). I was waiting for it to at least approach a correction.

But once I looked at the iShares Russell 2000 ETF (IWM) chart, I had an epiphany. I noticed that almost every time it touched or minorly declined below its 50-day moving average, it reversed.

The chart does not lie. Look at it above. Excluding the recovery in April from last year’s crash, 5 out of the previous 6 times the Russell did this with its 50-day, it saw a sharp reversal. The only time it didn’t was in October 2020, when the distance between its 50-day and its 200-day moving average was a lot more narrow.

Fast forward to Tuesday (Mar. 23). The Russell 2000 saw its worst day since February 25- and I loved every second of it. I felt almost similar to how I felt over the weekend during March Madness when I correctly called 13 seed Ohio to upset 4 seed defending NCAA champion Virginia. Finally, after weeks of waiting for a time to pounce on the Russell 2000 and missing golden opportunities, I think the time has come. We’re back right below its 50-day.

Aggressive stimulus, friendly policies, and a reopening world bode well for small-caps in 2021. I think this is something you have to consider for the Russell 2000 and maybe overpay for.

I’m finally switching this to a BUY.

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Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

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