Is the Russel 2000 ETF about to collapse?

The charts are indicating caution.

Articles, social media, ever since the markets have been in turmoil those past two years you will now read how shrewd investors are taking refuge in precious metals and index funds for a steady yet underwhelming return in the years to come.

But what if there was no return in either until at least 5+ years?

What if the only returns to be made were with individual stock picks?

I think there’s a strong argument to be made for both. But first the Russel 2000 ETF TA, why bearish? On the above 1 month chart:

1) Price action and RSI support both fail.

2) Price action exits a bear flag with a 25% measured move to the downside.

3) MACD crossover (blue circles). A reminder this is the monthly chart. Looking left, a bearish crossover has resulted in 30% drawdowns in the market in the months the follow this signal.

4) It is interesting that a 25% correction will also find price action strike the golden ratio, which is also equal to the bear flag extension!

Yeah.. (think John Wick), it’s bearish.

Now what of this 5 year wait before a return? I think both metals and index funds are going to be brutal for any investor who enters a long positions today. Why? Look left, it is that simple.

Typically long positions before 30% corrections in this ETF required 3 years of waiting before a breakeven point, with the exception of 2007, which took 6 years. Why the difference? Very simple really, the higher they climb the further they fall.

The recent market performance from April 2020 saw 110% return for those investors who took long positions. Just as with 2002 market top after a 140% rally a long position would now take 6 to 7 years to print a return.

Why individual stock picks? This is a traders market. A blanket sweep across multiple positions is only good during times of easy money, in my opinion. Performance in the market will only be achieved through finding value stocks rather than growth. Again, my own opinion.

Since the Russel 2000 ETF started correcting in April 2021 there have been exceptional individual stock picks that have returned well over 100%. Some examples below.

Questions? just ask!

Ww



Examples of individual stocks picks that have outperformed:

Weight Watchers international, up 200% since the market low

Pacific Biosciences of California, up 170% since the market low

Vroom up over 200%