Small Caps Breakout, But Every Friday This Happens
Geoff Bysshe | Feb 14, 2020 12:18AM ET
Today, the Modern Family’s Grand Dad (NYSE:IWM) broke out of the 6-day range I’ve been highlighting.
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It was also the only index to close over yesterday’s high.
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This is bullish action, and now the question is…
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Can IWM play catch up, or better, begin to take a leadership role by moving out to new highs?
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The last time the IWM attempted to break out of a compression pattern it was also on a Thursday (1/16). This not surprising as you’ll read later.
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Unfortunately for IWM, Thursday has not been a good day to breakout.
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Since the beginning of 2020, all but one Friday has closed lower in the SPY (NYSE:SPY).
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IWM has a perfect record of closing lower on every Friday this year.
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From another perspective, the SPY (NYSE:SPY) has gained 18 points this year but lost over 9 points during Fridays.
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Mathematically, this would suggest that if we had a 4-day work week with the markets closed on Friday, stocks would be twice as high for the year.
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On the surface that makes sense, but in reality, the market doesn’t work that way.
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This pattern is most likely attributable to fear of negative news occurring over the weekend (i.e. coronavirus news).
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This thesis supported by the fact that the TLT’s have done the opposite as the SPY (NYSE:SPY). The TLT has closed higher in all but one of this year’s Fridays. Traders feel safer owning bonds.
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So if traders are nervous about the weekend, then being closed on Friday’s would only push Friday’s weakness back to Thursday.
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More importantly, if you’re looking for IWM to continue its breakout tomorrow, don’t be disappointed if it doesn’t happen.
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After all, it’s Friday, and it’s a long weekend. That can be even scarier.
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We’ll likely have to wait until next week to see if this breakout is for real.
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Until then, the key level to hold is 167.
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And, if we get strong up day tomorrow, that would be very bullish longer term.
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Finally, you may be wondering what the best performing day of the week has been this year…
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Thursday has been up every week this year in SPY (NYSE:SPY) and all but one in the IWM.
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S&P 500 Touched all-time highs. Support area is 334.20 to 333.
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Russell 2000 (IWM) Broke out of the range from 50-DMA at 164.68 to 168. All time high is 170.56. Support at 168.30 and 167.11.
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Dow (NYSE:DIA) Didn’t touch new high. Today’s low is 294 support. More support down to 293. Then 290 is the major support to watch.
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Nasdaq (NASDAQ:QQQ) Another move to new highs. Support range is 230.30 to 228.40. Must hold 228.
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KRE (Regional Banks) Range to watch is 10-DMA, 55.36 to 57.36.
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SMH (Semiconductors) New high close. Support at 150 then in the area of 148.50 to 147.
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IYT (Transportation) Tried to break out of the 193.48-197.30 range. Needs to close well above 197.50 to break free.
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IBB (Biotechnology) Consolidation right under new high range. Range to watch is 123.60 to 121. One of the better-looking sectors right now.
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XRT (Retail) Inside day. Watch for a confirmation move over 45.25. Support at 43.75, and then 42.90.
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