NEW YORK (Real Money) -- After a day like Thursday, it is always a good idea to get your bearings on a major index. In this case, I think the small-caps are the best place to focus. Ironically, I would put the biotechs next before hitting up the S&P 500. I already hit on the biotech chart earlier this week, so I'm going to tackle the iShares Russell 2000 (IWM) based on Thursday's close.
Ironically, it wasn't Thursday but Wednesday when the break occurred. Wednesday was when IWM lost support of a solid bullish channel and Thursday was merely confirmation day. Any run into $124 to $125 should be seen as a chance to hedge, lighten up, sell, or outright short small-caps now. Until it goes above $126.62, this is a "What have you done for me lately?" exchange-traded fund.
The Relative Strength Index has cratered, but below 35, as it is now, I want to see extension into oversold territory (below 20) and then buy the bounce on the way out of oversold territory. Everything else is coming up bearish. I wouldn't be shocked by a small bounce, but the risk-reward hardly seems worth it on the daily chart below.
The weekly chart below seems to say IWM wants to go to $118 or at least $120, but over the next few weeks I believe it will be $118. Momentum and trend are both crossing over in bearish fashion. While they haven't spelled doomed, they haven't exactly been bullish, either. Best case is sideways trading, and that would be in a wide range of $118 to $125. Ideally, we'd see the On Balance Volume dropped a bit below the 21-week moving average into previous support and then rebound. This should happen in conjunction with a test of the $118 area. That's my targeted buy.