This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Oversold List Shows Market at Tipping Point

Stocks in this article: SPY IWM TZA SDS FAZ SO AMZN NFLX CROX

IWM Chart IWM data by YCharts

Another way to view the small cap horizon is to look at the Russell 2000 ETF and see how it compares to the TZA. iShares Russell 2000 Index IWM (IWM) is the trading ETF to look at. Unlike the leveraged ETFs, the straight "normal" ETFs are in my opinion, perfectly fine to use as part of a portfolio. I especially think they are wonderful when used as a diversification tool.

The weekly chart isn't what I would consider overextended. Not enough to pull the trigger to short it (the same as buying a bear ETF). On the other hand, the daily chart is indicating to me that a pullback in price is now expected.

SPY Chart SPY data by YCharts

For one more reference point, take a look at the SPDR S&P 500 SPY (SPY)

Standard and Poor's Depository Receipts trust is involved in the financial services industry. Their holdings are comprised of the 500 stocks in the S&P 500 Index. SPDR S&P 500 ETF trades an average of 126 million shares per day with a marketcap of $111 billion. It's 52-week trading range is $107.43 to $148.11.

Once again, the weekly chart appears ready to take a pause, and the daily is peering over the cliff looking down at support near $145.50 (or lower). The various index charts and the recently announced Fed's QE3 presents a unique challenge to reconcile the catalysts for market direction.

The answer is gaining clarity, even with Bernanke refilling the punch bowl, the economy has become like other addicts wanting a fix; a tolerance is building. Physiologically this is the third shot and more money doesn't fix a problem that doesn't lack liquidity.

I am not shorting the SPY yet, because I think there is a stock that offers a better risk vs. reward.

6 of 7

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,322.73 -94.12 -0.54%
S&P 500 2,014.52 -6.73 -0.33%
NASDAQ 4,690.71 +7.3030 0.16%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs