IWM Short

1 Feb

The past two weeks have been marked by significant volatility in global markets, driven by shifting U.S. economic policies, Federal Reserve decisions, and geopolitical developments. Here’s a breakdown of key events impacting the S&P 500 and global indices:

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### **Past Week (Jan 24–31, 2025)**
#### **1. Trump’s Tariff Threats Spark Market Anxiety**
- President Trump confirmed 25% tariffs on Mexico and Canada (effective Feb 1) and 10% duties on China, triggering a **2.6% drop in the Dow** and **0.5% S&P 500 decline** on Jan 31 [4][15].
- Investors fear disruptions to supply chains and inflationary pressures, particularly for energy and tech sectors [6][27].
- **Market reaction**: The dollar surged to a 2-year high, while Treasury yields climbed [15][29]. Small-caps (Russell 2000 **+1%**) outperformed large-caps due to pro-deregulation hopes [5].

#### **2. Fed Holds Rates Steady Amid Inflation Concerns**
- The Federal Reserve paused rate cuts, keeping the benchmark rate at 4.50–4.75% despite cooling inflation [30].
- **Market impact**: Tech stocks rebounded (Nasdaq **+1.6%**) as investors priced in delayed easing, while Treasury yields rose to 4.57% [31][10].

#### **3. Tech Sector Volatility**
- **Apple** fell **4%** after Jefferies downgraded its stock, citing weak AI prospects [5].
- **Nvidia** surged **9%** post-selloff, reclaiming its position as the world’s most valuable company (3.39T market cap) [5][31].
- Crypto stocks rallied on Trump’s SEC crypto task force announcement (Bitcoin **+2.2%** to $106,109) [5].

#### **4. Global Market Reactions**
- **Japan’s Nikkei** plunged **8.1%** on Jan 29 amid U.S. recession fears, while European markets (Stoxx 50 **+1.3%**) stabilized [11][6].
- **Emerging markets**: India’s growth slowed but remained resilient due to domestic demand [28].

---

### **Previous Week (Jan 17–24, 2025)**
#### **1. Post-Inauguration Market Rally**
- Trump’s pro-business executive orders drove the **S&P 500 to a record high (5,650)**, with small-caps (Solactive 2000 **+1.5%**) leading gains [6][21].
- **Sector moves**: Energy stocks fell (**-3.3%**) on oil oversupply fears, while industrials rose on tariff negotiation hopes [6][29].

#### **2. Jobs Report and Recession Fears**
- Weak July hiring data (unemployment **4.3%**) intensified recession worries, causing a **3.7% S&P 500 drop** on Aug 5 [1][7].
- Goldman Sachs raised recession odds to **25%** and projected three Fed rate cuts by December [3][7].

#### **3. Global Sell-Off**
- **Japan’s Nikkei** crashed **12.4%** (worst drop since 1987), triggering trading halts [3][37].
- European markets (Stoxx 600 **-3%**) and Bitcoin (**-14%**) mirrored the panic [3][11].

#### **4. Earnings and Sector Shifts**
- **Charles Schwab** jumped **3%** on strong earnings, while **Walgreens** plunged **12%** amid opioid lawsuits [5].
- Solar stocks (**Invesco Solar ETF -2.3%**) tanked after Trump axed green energy subsidies [5].

---

### **Key Trends to Monitor**
| Factor | Impact on S&P 500/Global Markets |
|-----------------------|-------------------------------------------|
| **Tariff escalation** | Increased volatility in industrials, tech, and energy [6][15]. |
| **Fed policy** | Delayed rate cuts may pressure growth stocks [10][30]. |
| **Tech earnings** | AI-driven companies (Nvidia, Microsoft) remain pivotal [5][31]. |
| **Global growth** | Weakness in Japan/Europe could drag U.S. exports [6][37]. |

---

### **Outlook for February 2025**
- **Upcoming catalysts**:
- **Feb 1 tariffs**: Markets will assess retaliation risks from China/EU [15][27].
- **Q4 earnings**: Microsoft, Meta, and Tesla reports (Feb 2–5) could dictate tech sentiment [31].
- **Fed guidance**: March rate decision remains critical for small-cap and housing sectors [14][30].

Analysts project **S&P 500 2025 target: 6,500** (Goldman Sachs) but warn of **15% downside risks** if AI growth disappoints or tariffs escalate [2][26].

Citations:
[1] cnbc.com/2024/08/04/stock-market-today-live-updates.html
[2] thestreet.com/investing/stocks/veteran-fund-manager-issues-dire-s-p-500-warning-for-2025
[3] nytimes.com/live/2024/08/05/business/stocks-market-crash-economy
[4] newsweek.com/stock-market-plunges-trump-tariffs-mexico-canada-china-2024502
[5] cnbc.com/2025/01/20/stock-futures-rise-as-trumps-second-term-begins-live-updates.html
[6] jpmorgan.com/insights/markets/top-market-takeaways/tmt-the-first-days-of-the-trump-presidency-3-things-we-learned
[7] cbsnews.com/news/stock-market-today-dow-jones-s-p-500-down/
[8] investopedia.com/dow-jones-today-01242025-8779647
[9] bloomberg.com/news/articles/2025-01-28/stock-market-today-dow-s-p-live-updates
[10] bankrate.com/banking/federal-reserve/how-federal-reserve-impacts-your-money/
[11] apnews.com/article/stocks-markets-nikkei-economy-c6240977e9482bf7207abc53b2a11e58
[12] investopedia.com/dow-jones-today-01292025-8782191
[13] nahb.org/news-and-economics/housing-economics/national-statistics/framing-lumber-prices
[14] cnet.com/personal-finance/what-this-weeks-fed-decision-means-for-mortgage-rates/
[15] reuters.com/markets/global-markets-wrapup-1-2025-01-31/
[16] economicsobservatory.com/how-do-elections-affect-the-stock-market
[17] bbc.co.uk/news/live/c5ykkryglp3t
[18] pwc.com/gx/en/services/deals/trends.html
[19] deccanherald.com/business/us-fed-rate-decision-budget-earnings-major-driving-factors-for-markets-this-week-analysts-3373378
[20] seekingalpha.com/article/4752503-us-earnings-key-for-overweight
[21] investopedia.com/dow-jones-today-01232025-8778974
[22] theweek.com/personal-finance/us-presidential-election-stock-market-impact
[23] investopedia.com/dow-jones-today-01172025-8776399
[24] reuters.com/markets/us/futures-dip-trump-policy-uncertainty-data-earnings-awaited-2025-01-24/
[25] finance.yahoo.com/news/undiscovered-gems-potential-explore-january-090320664.html
[26] money.usnews.com/investing/articles/will-the-stock-market-crash-risk-factors
[27] bloomberg.com/news/articles/2025-01-29/stock-market-today-dow-s-p-live-updates
[28] www2.deloitte.com/us/en/insights/economy/asia-pacific/india-economic-outlook.html
[29] finance.yahoo.com/news/us-dollar-retreats-from-2-year-high-as-trump-touts-tremendous-tariff-power-but-holds-off-on-swift-action-132853993.html
[30] cnn.com/business/live-news/fed-meeting-january-01-29-25/index.html
[31] investopedia.com/dow-jones-today-01282025-8781439
[32] forbes.com/sites/investor-hub/article/best-stocks-to-buy-2025/
[33] reuters.com/markets/us/futures-climb-investors-eye-inflation-data-quarterly-earnings-2025-01-14/
[34] barrons.com/livecoverage/stock-market-today-010725
[35] economics.td.com/us-weekly-bottom-line
[36] investopedia.com/dow-jones-today-01162025-8775512
[37] nytimes.com/2024/08/05/business/global-stocks.html

---
Answer from Perplexity: pplx.ai/share

1 Feb

Nota

The iShares Russell 2000 ETF (IWM) presents a complex technical setup across multiple timeframes. Here's the detailed analysis:

## Overall Market Context
The ETF is currently trading at $226.48, showing increased volatility with a bearish bias in the short term. Volume profile indicates moderate institutional participation at 35.35M shares.

## Technical Analysis Breakdown

### Trend Analysis
**Short-term (1-4 weeks)**: Bearish
- Price action shows a clear breakdown below key EMAs
- Recent rejection at $230.19 resistance level
- Declining volume pattern suggests weakening buying pressure

**Medium-term (1-3 months)**: Neutral to Bearish
- Trading within a defined range between $216.98 and $230.19
- Failed to maintain momentum above December highs
- 50-day EMA acting as dynamic resistance

**Long-term (3+ months)**: Bullish
- Higher lows formed since March 2024
- Upward sloping support trendline intact
- Volume profile shows accumulation at higher levels

### Key Technical Levels
| Level Type | Price | Significance |
|------------|-------|--------------|
| Resistance | $230.19 | Major supply zone |
| Support | $225.02 | Immediate support |
| Critical Support | $216.98 | Major demand zone |

### Indicator Analysis
**Moving Averages**:
- Price trading below both EMAs (226.79 and 227.67)
- Bearish cross forming on shorter timeframes
- EMA compression suggesting potential volatility expansion

**Volume Profile**:
- Declining volume during recent pullback
- Key volume node at $225-226 range
- Distribution pattern forming at higher levels

## Trade Setups

### Bearish Scenario
**Entry Trigger**: Break below $225.02
- Stop Loss: $227.67 (above recent swing high)
- Targets:
1. $222.00 (1.5:1 R/R)
2. $216.98 (3:1 R/R)

### Bullish Scenario
**Entry Trigger**: Break and close above $230.19
- Stop Loss: $225.02
- Targets:
1. $235.00 (1.5:1 R/R)
2. $240.00 (2.5:1 R/R)

## Risk Management Considerations
- Position sizing should be reduced due to increased volatility
- Multiple time frame confirmation required for trade execution
- Tight stops recommended due to choppy price action
- Consider scaling in/out of positions given current market conditions

## Immediate Action Items
1. Monitor $225.02 support level for potential breakdown
2. Watch volume on any breakout attempts above $230.19
3. Prepare for increased volatility if EMA compression resolves
4. Consider partial positions until directional clarity emerges

Citations:
[1] pplx-res.cloudinary.com/image/upload/v1738435119/user_uploads/KupHmbGLiYvVPHu/Screenshot-2025-02-01-at-1.38.35-PM.jpg

---
Answer from Perplexity: pplx.ai/share

2 Feb

Nota

The Russell 2000 (IWM) and its constituent companies face heightened risks compared to the S&P 500 and Dow Jones Industrial Average (DJIA) due to a combination of macroeconomic, policy, and structural factors. Here's a detailed analysis of why mid-cap and small-cap stocks are more vulnerable under current conditions:

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## **Key Risks for Russell 2000 Companies**
### **1. Tariffs and Trade Policy**
- The Trump administration's implementation of **25% tariffs on Mexico and Canada** and **10% on China** disproportionately impacts smaller companies that rely heavily on imported goods or components. Unlike large-cap firms, which often have diversified supply chains and pricing power, small- and mid-cap companies are less equipped to absorb or pass on higher input costs[3][4][17].
- Small caps, which generate a higher percentage of revenue domestically, may benefit from reshoring trends but face immediate cost pressures from tariffs, particularly in industrials, materials, and consumer discretionary sectors[12][53].

### **2. Interest Rate Sensitivity**
- The Federal Reserve's decision to pause rate cuts keeps borrowing costs elevated. This is particularly problematic for Russell 2000 companies, as **38% of their debt is tied to floating rates**, compared to just 6% for S&P 500 companies[7][30].
- Higher interest expenses reduce profitability, especially for smaller firms with weaker balance sheets and limited access to capital markets[6][40].

### **3. Profitability Challenges**
- Nearly **45% of Russell 2000 companies are unprofitable**, compared to only ~5% of S&P 500 constituents. This structural weakness makes small caps more vulnerable during periods of economic uncertainty or rising costs[9][11].
- The lack of consistent earnings among many Russell 2000 firms limits their ability to weather macroeconomic shocks like tariffs or inflationary pressures[30].

### **4. Economic Sensitivity**
- Small-cap stocks are highly cyclical and more sensitive to economic slowdowns. With U.S. GDP growth projected to slow due to trade tensions and higher inflation, these companies face greater headwinds than large-cap counterparts with diversified revenue streams[13][51].
- Consumer sentiment and spending, which are critical for small caps, could weaken if tariffs lead to higher prices for goods[3][52].

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## **Comparative Resilience of S&P 500 and DJIA**
- **S&P 500**: Large-cap companies benefit from global diversification, stronger balance sheets, and greater pricing power. Many S&P 500 firms have robust supply chains that mitigate tariff impacts and access to cheaper financing options[15][20].
- **Dow Jones (DJIA)**: The DJIA's composition favors blue-chip companies with stable earnings, lower debt ratios, and significant market share, making them less exposed to trade policy volatility or rising rates[15][42].

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## **Potential Downward Pressure on Russell 2000**
| Factor | Impact on Russell 2000 | Comparison with S&P 500/DJIA |
|-------------------------|------------------------------------------|-------------------------------------|
| Tariffs | Higher input costs; weaker pricing power | Larger firms can absorb costs better |
| Interest Rates | Elevated borrowing costs | Less exposure to floating-rate debt |
| Profitability | High percentage of unprofitable firms | S&P/DJIA dominated by profitable firms |
| Economic Sensitivity | Reliant on domestic growth | Global diversification reduces risk |

---

## **Outlook**
While small caps could benefit from long-term trends like reshoring or tax incentives under the Trump administration, the immediate risks from tariffs, high interest rates, and economic uncertainty outweigh these potential tailwinds. Investors should exercise caution with the Russell 2000 in the near term while favoring large-cap indices like the S&P 500 or DJIA for stability amidst macroeconomic volatility.

3 Feb

Dagangan aktif

I entered the trade short on the open. The trade found buyers on news that tarrifs were delayed by 1 month.
I DCA at 225.
a close above 231 will invalidate this trade.
Price dipped shortly after DCA at 225. I closed 25% of the trade to reduce risk.
I will antcipate price to swing to 230 where i will DCA to anticipate a trap where retail traders will get taken out by a large seller.

My case and analysis continue to be short until proven guilty.
close above 231 will invalidate this idea.


reflection:
what i did well is DCA around 225 where there is major resistence. closed some of the trade around 223 to limit risk.
continued to respect the plan.

9 Feb

Dagangan ditutup: sasaran tercapai

### **IWM Trade Update Summary**

I followed through with my plan, ensuring price never broke above 231. I executed a dollar-cost averaging (DCA) strategy as expected and ultimately closed the trade after the move back below 227.

#### **Reason for Closing the Trade:**
- The **narrative around tariffs shifted significantly**—Trump used the tariff threats as a **negotiation tactic** to send troops to the border, addressing issues like drug trafficking, human trafficking, and migration.
- **Tariffs were delayed by a month**, reducing the immediate bearish pressure.
- IWM **did not trend lower** as anticipated but quickly retraced back to the 230 level, approaching my stop-loss at 231.

Given these factors, I lost confidence in the trade. **Respecting my plan**, I exited at break-even with a small profit of a few hundred dollars.

#### **What I Did Well:**
- Followed the trade plan.
- Executed **DCA effectively** and adhered to the **231 stop-loss level**.
- **Respected my stop-loss** and exited before taking unnecessary risk.
- Closed the trade **for a small win** rather than forcing an uncertain position.
- Recognized the **narrative change**, which invalidated my conviction in the trade.

With this trade now **closed**, I am now searching for the **next trading opportunity**.