It was overbought, and it was trading 13% above its 50-day moving average<\/a> (MA) line – an extended condition. And it seemed like a poor idea, from a risk\/reward perspective, to buy into the small-cap sector.<\/p>\n Here we are, less than four weeks later, and IWM is 8% higher.<\/p>\n Look at the updated chart…<\/p>\n The IWM uptrend paused briefly at the end of December. But, it has exploded higher this month. All of the moving averages are rising along with it. It didn’t matter that the index was overbought and overextended last month. It kept moving higher anyway.<\/p>\n Lots of folks are betting the trend will continue.<\/p>\n And, just like last month, I’m not so sure…<\/p>\n Yes, I was wrong last month. And, maybe I’ll be wrong this time, too. But, since IWM rarely gets more than 7% away from its 50-day MA before snapping back towards the line, it still seems like there’s a lot more risk than reward to buying the small-caps here with IWM 13% above the line.<\/p>\n Plus, there’s this chart…<\/p>\n This is a chart of the Volatility Index<\/a> for the Russell 2000 (RVX). And, it’s perhaps the scariest chart in the market.<\/p>\n RVX recently closed above all of its various moving average lines. And, those lines have moved into a bullish<\/a> configuration – with the 9-day exponential moving average<\/a> (EMA – red line) above the 20-day EMA (green line), and the 20-day EMA above the 50-day MA (blue line).<\/p>\n![\"\"](\"https:\/\/cdn.jeffclarktrader.com\/JMU\/images\/202101\/20210113-mm-01.png\")
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