SPX -50bps intraday to open 2q13 this morning. I wanted to refresh the SPY 2006 analogue, which warned of this downdraft and suggests SPY should continue lower in the short term until its daily stochastic reaches oversold territory. Here’s a chart of the analogue–updated as of Thursday (last business day):
Small Caps (IWM) are getting particularly hit hard, -1.5% so far today. Regardless, as I said last week, RUT’s stochastic has receded further away from overbought conditions, and the 2006 analogue says its short term bottom will be relatively shallow:
According to the 2006 analogue that’s governed the entire broad market so far this year, a lower-low still awaits SPY–the turn down should occur next week the bottom the week thereafter. But, IWM’s near term low is in (2/25 @ $89), and Small Caps will rocket higher, outperforming for next quarter (14 weeks).
This week offers a buying opportunity for IWM.