Chart of the Day - Tuesday, January 5th, 2021

Today’s Chart of the Day was shared on Twitter by Greg Krupinski (@G_krupins). It's a chart of the Russell 2000 ETF, $IWM, over the past two decades. $IWM is nearly 30% above its 200-day moving average, which is the most extended it's ever been. While this over-extended reading might seem bearish, Greg points out that price thrusts of this magnitude have historically been a long-term bullish signal. There have only been two prior instances where $IWM was more than 25% above its 200-day moving average - 2003 & 2009. Both of these thrusts occurred after a major low and marked the start of a new bull market. In a comment to The Chart Report, Greg said, "There are plenty of bearish data points out there, especially around current valuations compared to history. Focusing on these could make you quite bearish. But nothing is as important as price action. Not even close. This huge surge off the lows and extension from the "mean" suggest there continues to be a great demand to own Stocks or Small-Caps in this case."