IWM Symmetrical Triangle

Hi all, this morning I want to make a post on IWM, one of my personal core holdings. For those who do not already know, IWM tracks the Russell 2000, which is a collection of the top 2000 small-cap US equities.
Fundamentally, we are beginning to see default rates jump within smaller companies and poorly equipped balance sheets not being able to handle the pressure. Looking at the sector weightings, I see 16% tech, 16% healthcare, and 15% industrials. These industries rely on debt for a large majority of their growth. Lots of small-cap companies rely on floating-rate debt (interest payments rise with higher rates) due to creditors wanting higher yields for taking on the perceived risk. Also, lots of these 'cheap money notes' are beginning to mature and will continue into 2025. When these companies need to acquire new debt, creditors will either A. require much higher yields than before or B. not provide any debt whatsoever.

Yields are a huge driver for growth.

Technically, I'm seeing a symmetrical triangle pointing to the downside. As we've completed a 5-wave move, we could see a sharp downturn for IWM.

Comment:

Equities seem to be down today due to lower jobless claims. If this feels sort of backward, that makes sense. After all, we should be cheering over healthy employment numbers, but unfortunately, the markets and the economy are not the same. The market cares about the value of companies and uses economic indicators to try to predict where value is headed.
Today's data release and reaction prove that inflation is top of mind for investors, even though we've seen an extreme decrease in CPI. Inflation intrinsically devalues equities due to higher upfront costs for EVERYTHING. So if consumers stop spending (which they'll have to if inflation is above target), then companies begin to lose their profitability, a perfect example for today is TSLA (even though it doesn't belong to Russell 2000). TSLA is still making money, but at a much slower rate, indicating a slowdown, and thus its expected value (PVFCF) is decreased.
I'm going to continue updating, but I think we've hit a turning point today.

Comment:

Depending on how closely you're watching price action, things may seem like a whipsaw. To those standing back a bit, it seems that we've been at a standstill. To me, it's been a standstill, the market is confused and flooded with so much data and conflicting news. My consensus: jobless claims recently published yet another fall. I presume the market sees this as pushing inflation and therefore not good news. Yesterday, Fitch downgraded US treasuries to AA+ from AAA. Some important notes here, the first being that Fitch is concerned with the growing deficit, fair enough. They expect 'fiscal deterioration' over the next 3 years and a growing general debt burden (the deficit will continue). More importantly however, they're concerned with 'the erosion of governance related to AA and AAA peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions.' All else being equal, I think Fitch pretty on the money. Two more important thoughts, Fitch is the smallest of the top 3 ratings agencies (S&P, Moodys, Fitch) and therefore it seems like they have the most wiggle room and the least to lose by doing this, it also gives them the spotlight for a time. Also to note, the only other time US treasuries have been downgraded by one of the big 3 was by S&P in 2011, the rating was then subsequently upgraded and most of those who made the downgrade were fired.

So how do I boil this down? I'm not exactly sure yet. The United States has lived in a budget deficit for too long.