Dow over multi year highs... Watching $90.15 on the $IWM
$90.15 is key level as it is the 100% Fib extension of the 2H2012 range. Putative topping action over the last few weeks has been working through this level. But as the last two weeks closed above this mark forming a high base, we are set up to go parabolic. Next fib mart is $98.62. Playing via the 3xbull ETF $TNA. Remember that if/when as we move beyond highs in the DOW & S&P500, hedges will be ripped off. And one of the most popular hedges? The inverse Russells 2K ($TNA), given low div burden. This will result in small out performing large cap for this phase of the leg.
The trend is your friend, and your friend wants to crush the shorts. Especially if Pres Obama admits his sequestration bluff has been called and he finds a way to postpone the start. Such may lead to a bit of a falling dollar, but it would further goose prices of assets in dollar terms allowing for a tailwind over the key technicals.
We see this move continuing for some time, as bonds start to underperform, the retail will finally make the move in mass to equities. Likewise, US will see flows as unease in the EU and periodic tension in Asia (Iran, N Korea, etc) will push money to American shores.
Don't beleive me yet? Chart the $IWM on a month or OPEX period. A fib extension on the $IWM from it's 2003 low at $34,12. After the 2007 peak, it did a 100% retrace in 2009, then, in 2011, a full reversal. Then in Spet '11, a near text book 50% retrace, before another re3versal. Then a 50% retrace of that move, followed by a full reversal again. The range at $86 to $83 whould now convert from resistance to support. And while we are due for a throwback test of this support, would expect a breathless retrace once again.
The retail has finally discovered ETFs, and we are starting to see them being added into 401K plans. Also, as Baby boomers retire, they are moving funds out of 401k mutual funds, and into self directed IRAs, which allow them access to ETFs. As bonds under perform, yeild seeking baby boomers will move to equities, and while some will move toward div paying large caps, small caps out perform as they lead rallies.
As we leave $90.15 in the dust, investors around the world will run to US based small caps. She going parabolic.