Small cap leaders overbought

The IWM (iShares Russell 2000 Index Fund ETF) is showing signs of being overbought as it challenges the June highs.  This level is significant long term support/resistance as shown here.  A negative divergence has developed in the MACD histogram as the MACD itself is approaching levels that have marked previous tops.

A pause in the rally here is likely.  We are looking at downside support in the area of 68-72.  Maintaining the trend in relative strength is crucial to any further rallies.

We are also rapidly approaching the September – October washout period that has historically provided excellent entry opportunities.  Small caps maintaining relative strength and holding support throughout this typically volatile period would be a major positive for the market as a whole.

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