My minimum correction target has been hit with the typical reaction off that key support level, which is the bottom of the trading range since early December. So far a typical oversold, counter-trend bounce that hasn’t even made it to the 38.2% Fibonacci retracement of the move down off the highs yet. 60-minute charts below are the previous chart posted back on March 6th followed by today’s updated 60-minute chart.
The catalyst for this rally was two-fold:
- First & foremost, IWM was extremely oversold on the near-term time frames & bounced off the initial tag of key support, the bottom of the trading range as initial tags of support levels that haven’t been visited in a while almost always produce at least a minor reaction.
- The positive (bullish) divergences highlighted yesterday on the 5-minute time (first chart below) did end up playing out, with IWM might one slightly lower low following that update, with the divergences still very much intact at that low.
The fact that IWM hit key support on the 60-minute time frame with bullish divergences in place on the 5-minute time frame combined as the catalyst for what so far appears nothing more than a typical oversold, counter-trend bounce off support. Hard to say how much more upside, if any, is left but my best guess would be a reversal on or before the 38.2% Fibonacci retracement of the move down off from the March 1st highs. That level comes in around 135.90.
Personally, I did not, nor have any intention of covering my Russell 2000 short position as the longer-term charts, particularly the daily charts, indicate that this is most likely a counter-trend bounce in a larger correction with more downside to come soon.