It’s the one question on every investor’s and trader’s mind…

After a brutal September, will the markets find a bottom here in October?

And if so, when? And at what level?

Today, I’ll aim to answer those critically important questions in the simplest way possible.

It all revolves around small cap stocks.

You see, because small cap stocks are riskier than their large cap peers, they tend to hit their peaks before anything else.

Why is this?

It’s quite simple, really.

Small cap companies tend to be more sensitive to changes in the economy than larger companies – which means they respond more dramatically in times of economic growth and expansion.

Obviously, that’s great for good times.

However, when the pendulum swings back and times get tough, small cap companies are impacted just as negatively on the downside.

As a result, small cap stocks typically hit their bottoms before their large cap peers.

With that in mind, let’s see where the Russell 2000 small cap index is trading right now.

As a tracking device, I’m going to use the iShares Russell 2000 ETF (IWM).

Check out the chart below…

Action Plan: As you can see by my annotation, $165 has been a key level of support for the small cap sector since July. If it holds again here in October, it could establish a double bottom. That could be your early indicator that the major market averages are close to setting their lows for the year. This is the level I’d use to determine whether it’s time to buy the dip… or whether stocks have new lows to set in the fourth quarter.

P.S. How has The War Room been trading during the recent market pullback? Well, I’ll let our members answer that question for you. Just look at the huge winner they took this morning on our Merck (MRK) trade – which we held for just four trading days – and the answer will be obvious.

“Out of MRK for 80% Gain In $1.47 Out $2.64.” – RDSCHERER 10/10/2022 at 9:35:37 a.m.

“MRK. Bought to open 14 Oct 88 calls @$1.68. Sold to close @$2.90. A 62% gain. Thanks Bryan.” – tlee9999 10/10/2022 at 9:35:57 a.m.

“Thanks Bryan!! Averaged in at 1.74 – out at 3.5. A sweet 101%.” – JoeS 10/10/2022 at 9:37:17 a.m.

“I closed the 8 Shares/Contracts I opened at $1.40 for $3.08. 120% gain after doubling down.” – Gary S17 10/10/2022 at 9:37:25 a.m.

Are you ready to start hitting these winners for yourself – no matter what direction the market is moving? Then what are you waiting for? Join us inside The War Room right now.

Here’s How to “BE IN” the Room – Starting Tomorrow Morning

Monday Market Minutes

• This week could be pivotal. Inflation numbers premarket on October 13 could take us even lower or turn the trend back up sharply for another face-ripping bear market rally, like the one we saw last week.
• Look for brokerage firm downgrades en masse to continue, as they want to pile on before an expected weak earnings season that starts this week.
• Come Friday, the big financial earnings reports start hitting. Here’s the lineup for before the market open: JPM, C, MS, WFC, PNC and USB. Potential for Win-Both-Ways trades here.