Small, Big

It is difficult to overstate just how significant of a must-hold area the small caps are currently probing. 

On the way down, there were several spots we flagged which bulls would have preferred seen hold valiantly. But that is a much different scenario than a price area on IWM (ETF for the small-cap Russell 2000 Index) which simply must hold. 

Case in point: The mid-$140s on IWM, below on its daily chart updated, dates back to at least last January (actually back to October 2018) as representing sound support. But below there there seems to be a huge void down to the late-2018 lows below $126, which would be a rather painful swoon indeed for longs if we see a repeat in Q4 2019. 

As for bright spots today in what is still a headline selloff of the Down being down more than 400 points, this is also the first day in while that IWM has outperformed the larger indices. IWM is currently down less than 1%, while QQQ is down 1.5%, for example.

And it is happening right where bulls need it most: The mid-$140s coupled with price punching underneath the lower Bollinger Band, also seen below and denoting short-term oversold conditions. 

Going forward, software growth names, biotechs, pot stocks, and small caps all seem to be in the same boat: They have been bludgeoned in recent weeks and are now showing signs of selling being slightly exhausted. The lows in all of them from this week must hold for there to be a viable case of stabilization, of course. 

But if the smalls start to play big the rest of this week it should be the first step towards salvation.