Today stock market bulls got the banana. Is this event the big banana (a steep decline) or a bottom with a retest of the lows?
Fear as measured by the volatility index is perking up but not screaming yet (VIX chart). Newsletter sentiment has turned quite bearish so a tradeable bottom is getting closer (Marketwatch sentiment article).
Traditional chart reading says if IWM breaks below 64 (chart) the next downside target is the width of the recent range or eight points, giving a target of 56. Today's close just above 66. Another possible scenario is taking out the stop below the tick low of 64.19, and then a trading rally. If the market gaps to the downside at the open tomorrow, that might be a sign of capitulation and a good entry point for longs.
When in doubt get out, and that is where I have been and continue to be--out.
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