When I am underinvested, as I have been for a while, I am always on the lookout for pullbacks to buy -- and boy, has today been good on that account.
Today the Russell 2000 is suggesting a near-term low as it returns to its gap from March 13 from 814.29 to 818.22. This morning's low was 816.70, well inside of that gap. On that dip, I did some buying of the iShares Russell 2000 (IWM) for underinvested accounts. If the RUT closes near the session lows or near the bottom of that gap, I'll add to my positions at Rydex.
Back down to the March 13 gap
Then there is the Dow, which has been flirting with 13,000, which had been resistance and is now acting as support. Of note, the previous high before last week's blast above the 13,000 level was 13,055, from Feb. 29. That previous high had to be revisited on the downside, and now it has been. The low so far on this move has been 13,017, which represents a pullback of 270 points from the Dow's recent highs. (By the way, on the chart below there is a typo that shows the high of 13,389; it should be 13,289). That's a pretty good dip of about 2%. If the 13,000 level continues to hold, it will be the new short-term support level. That's not to say it can't be broken -- indeed, it should be broken at some point. But, for now, it's a level to buy.
Pulling back to the area of the prior high
In the S&P 500, as noted in Tuesday's column, there were just four remaining overhead gaps going back to the all-time highs. Despite today's selloff and gap-down openings in most indices, the SPX doesn't show one. So there are still four overhead gaps. (Of course, if there were a gap from this morning's opening, it would be 1402.89.)
Still just four overhead gaps
In addition to a pretty good pullback in some of the stock indices, you have no doubt noticed the meltdown in the XAU gold and silver index. This thing is now closing in on multiyear lows, but for the moment it's still holding narrowly above the October lows from 2011 of 171.27. Yesterday's low of 172.67 is just above it. Breaking below this level probably would spell more trouble for this beleaguered index, but if it continues to hold -- or at least looks like it's holding -- I will add to my positions in the precious metals fund at Rydex.
I am also now beginning to look at writing some distant May or June puts in the iShares FTSE/Xinhua China 25 Fund (FXI) as it sells off to multi-month lows. Writing puts on this ETF has been a very profitable strategy over recent months despite the recent sideways pattern here.