Standard Error Channel on Russell 2000 ETF Shows How Oversold It Was
October seemed to suggest that investors shifted to a more risk-averse mindset. The Nasdaq Composite and the Russell 2000 are considered to be riskier than the S&P 500 and both took much bigger losses than the S&P 500 did during October.
The Russell lost 10.91% in October and the Nasdaq lost 9.2%. For the Russell, October’s loss was the worst monthly loss since September 2011. The Nasdaq’s loss was its worst since November 2008.
The Russell also lost ground in September and that put the index in oversold territory based on a couple of indicators. Using the iShares Russell 2000 ETF (NYSE: IWM) as a barometer for the index, we can see just how oversold the Russell was. The chart below shows that the 10-week RSI and the weekly stochastics both hit their lowest levels since early 2016.
You can see that the RSI hit oversold territory for the first time since February ’16 and so did the stochastic readings. Both indicators registered slightly lower readings two weeks ago than they did in 2016.
While these indicators suggest that a bounce is due, there is another type of chart that really shows just how oversold things seemingly got two weeks ago. The chart below shows the standard error channel for the IWM over the last four years. The center line is a regression line and the outer lines are one standard error from the regression line.
As you can see, the IWM was trending higher from that early 2016 low and it was doing so in a very tight range around its regression line. The recent six-week selloff took the IWM below the lower standard error line. This was happening as the oscillators were reaching their lowest readings in almost four years.
If you are an investor who believes that stocks and markets will eventually revert to a mean, the standard error chart suggests that a rally by the IWM is due -- or at least that it is more probable than further losses.
Then again, there is also that old saying that “oversold can always become more oversold.”
IWM saw its Stochastic Oscillator recovers from the overbought zone
The Stochastic Oscillator for IWM moved out of overbought territory on June 13, 2025. This could be a bearish sign for the stock and investors may want to consider selling or taking a defensive position. A.I.dvisor looked at 62 similar instances where the indicator exited the overbought zone. In of the 62 cases the stock moved lower. This puts the odds of a downward move at .
Technical Analysis (Indicators)
Bearish Trend Analysis
The 10-day RSI Indicator for IWM moved out of overbought territory on June 11, 2025. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 30 similar instances where the indicator moved out of overbought territory. In of the 30 cases, the stock moved lower in the following days. This puts the odds of a move lower at .
The Moving Average Convergence Divergence Histogram (MACD) for IWM turned negative on June 13, 2025. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 45 similar instances when the indicator turned negative. In of the 45 cases the stock turned lower in the days that followed. This puts the odds of success at .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where IWM declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
IWM broke above its upper Bollinger Band on June 09, 2025. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
Bullish Trend Analysis
The Momentum Indicator moved above the 0 level on June 05, 2025. You may want to consider a long position or call options on IWM as a result. In of 91 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .
The 10-day moving average for IWM crossed bullishly above the 50-day moving average on May 09, 2025. This indicates that the trend has shifted higher and could be considered a buy signal. In of 17 past instances when the 10-day crossed above the 50-day, the stock continued to move higher over the following month. The odds of a continued upward trend are .
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where IWM advanced for three days, in of 318 cases, the price rose further within the following month. The odds of a continued upward trend are .
The Aroon Indicator entered an Uptrend today. In of 261 cases where IWM Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
Notable companies
Industry description
Market Cap
High and low price notable news
Volume
Fundamental Analysis Ratings
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
Advertisement
General Information
Category SmallBlend
Advertisement