To Believe or Not to Believe

On the back of Dr. Anthony Fauci allowing for some optimism earlier this morning as he said new cases appear to be nearing their peak and the rate of hospitalizations is down, stocks are recovering from an ugly close yesterday, as I write this. The small caps in the Russell 2000 Index are clearly outpacing the the senior indices, most likely a result of market players anticipating the many smaller businesses may be able to re-open just in the nick of time to stave off complete financial disaster. 

Of course, the issue going forward is whether the optimism is warranted. Should the economy re-open too soon and we see another surge in virus cases it would put governments at all levels of the country in a particularly tough spot as far as needing to potentially assert another lockdown and extended period of quarantine across the country. 

So the question is whether you believe the end of the lockdown is drawing nigh or not, with a plethora of ugly scenarios if the economy is re-opened too soon, both in terms of health and economic fallout

As for the small caps leading today, I have my eye on the $118 level for the IWM ETF, seen just above spot price on the updated daily chart, below. 

With the wild price swings and short squeezes we have seen in the last two weeks, especially the violent overnight moves in the futures, it *feels* like this chart should be much higher than what it is showing us now. As you can see, we are hitting resistance dating back to March 12th/13th. Should bulls clear $118 and hold above I would consider is a more meaningful step in the right direction albeit with more work to do. Still, it would qualify as something beyond a sharp multi-day short squeeze.