Let's Talk About a Target Price for the Russell 2000
With the Russell rallying into resistance, the question on everybody's mind is, where will it go? We'll also talk bonds (TLT), banks (C, BAC), and other names like PM, CVS, ETSY, and NVR.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
The Market
The major indexes recovered some of the loss from yesterday, so it really didn’t change much. But the IWM did keep on going, and now that it is in day four of its rally, it’s got everyone talking about it.
Let me start with the question I got of what the target on the IWM is. You can see it has had a nice run since that reversal off 215 last Thursday and now it is at resistance. Since I have earmarked the market to return to an overbought condition late this week/early next week I would be in favor of selling a portion of this because it’s at the old high and nearing an overbought condition.
As for a target, there is a short-term measured target around 228, which is essentially right here. Longer term (months) it would have a measured target around 240-ish.
Now I should turn to TLT which gapped up but closed on the low of the day. Of course, now that it has bounced, I have a lot of company with folks deciding it’s okay to buy it. My guess is we see a pullback before it makes a try for that gap fill up there at 97.
Breadth was quite good today and it got the McClellan Summation Index to stop going down. As far as sentiment, folks didn’t get as excited as they were two days ago. The indicators are still just ‘this’ side of extreme. Perhaps they are waiting for us to get overbought.
Note: I am taking tomorrow off as I have family coming to visit. If there is anything extraordinary (i.e. the DSI gets to the upper 80s for the S&P or the VIX falls near 10), I will send out a short note. Otherwise, the next edition will be Sunday.
New Ideas
About a week ago I noted that some of the recession/dividend stocks were starting to improve now that they had ten percent corrections. Philip Morris PM now has twin lows at 117.50 so it ‘s easy to define where you’re wrong. And the dividend is still good.
Today’s Indicator
The Volume Indicator is at 53%, so it still leans overbought.
Q&A/Reader’s Feedback
When we looked at Citibank C a few weeks ago I thought it was okay, but I favored Bank of America BAC just because I thought it had a cleaner runway. I still feel that way, but I was asked to update my view on Citi.
I think those twin highs at 67 are going to be some resistance for the time being. I think if Citi can churn around sideways between the low 60s and those highs it can gather enough oomph to get itself up and over those highs but right now it feels more like a trading range than anything else.
BAC also has the overhead resistance but you see the way it has stopped below it? I view it as a chance to take a breather before rallying again. The near-term target is 44.
I should note that the Bank Index measures to around 125 for this leg.
I believe when we looked at CVS CVS a few weeks ago I thought it could fill that gap and it has. It probably rallies again, but now it will have a lot of resistance to contend with all the way up. I’d rather buy ELV in the down and out healthcare space.
It looks like a giant top but it tried to break and has recaptured support at 490. That makes the risk/reward pretty good down here because if it falls under yesterday’s low you know you’re wrong.
Etsy ETSY is the definition of a stock in downtrend. It is also the definition of a stock in a channel and it is currently bouncing off the bottom of the channel so unless/until it pushes out of the channel, you buy the bottom and sell the top line.
NVR NVR is a housing stock that looks like almost all the other housing stocks. I would just say it’s a stock in an uptrend, and unless/until it breaks that line, the stock is what I would call a hold.
