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twm (3)

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Diamond Top In Small Caps

As discussed yesterday in Chat, small caps appear to be forming a diamond which can represent a "top" or merely taking a rest or consolidation before resuming it's trek higher.

Theory is to trade the direction of the break higher or lower.  IWM would work for a bullish breakout and TWM for a bearish break down for those who are unable to short.

fwiw we recently traded TWM on market weakness.  Looks as though it may be setting up again.

For more information on diamonds, I would suggest you browse through Thomas Bulkowski's pages at ThePatternSite.

For a technical analysis trader or investor, you need to be able to properly identify stock patterns his book …

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Admin

Divergence Continues

Pick any one of 10 difference reasons; does it really matter?

  • Autumnal solstice
  • End of quarter
  • End of fiscal year
  • Rosh Hashanah
  • CALPERS beginning to liquidate hedge fund positions
  • Curreny-related pressures
  • Concern over weak earnings
  • Weaker China growth
  • Russia's asset seizure proposal
  • EU growth concerns
  • China's $10 in Biliion bogus trades
  • QE…

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Admin

Small Caps

Small caps have been the 800 pound gorilla in the room as the Dow achieved a new all time high.  A stronger dollar would certainly have more of an impact on them of course as they tend not to have the cash reserves of their larger mid-cap and large cap cousins.  Lack of growth in the EU and China certainly do not help matters.

What some pose as a possible double top, could also be a bullish butterfly pattern beginning to emerge.  It's downside target would coincide quite nicely with it's rising 200 week simply moving average.*and* keep it within it's long term channel since the 2009 low (a buying opportunity) and then the reversal would kick in as the market would reverse (trapping shorts) and resume it's move upward.

BTW one…

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