The IWM ETF bumped up against $160 earlier this month after failing to break through in July and September. It got through this week to head toward $162."The one thing that makes me a little bit hesitant here … it's only a small higher high so far. We saw a very similar higher high back in May, a very minor one, and it was a complete head fake. It was followed by a 10% correction over the next month," Maley said.
After moving above $161 in May, the IWM declined nearly 10% to touch a low in early June. It made a lower low in late August. "We're still more than 6% below the all-time high [of 2018]. So, what I'm saying again, positive development, but we do need some more upside follow-through. Whether it happens now or after a little bit of a breather, either way, I want to see more of that before I really turn the green light on for this group," Maley added.
Quint Tatro, president of Joule Financial, sees opportunity in the small caps as the group begins to show signs of life. "In an incredible year, this is a group that has underperformed … due in part to its makeup -- you've got a tremendous amount of regional banks in the group and you also have small oil companies," Tatro said during the same segment. "We've been building the position and we added on the breakout. Why? Because of the risk reward.""It's a simple trade where you put the stop below the breakout.
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