Volatility on the Rise

Today's losses look big on current charts but in a historic context, they weren't too severe. However, big red bars are not to be ignored and 'market leading' Small Caps have felt the full brunt of the selling from July which is bad news for the broader market.  Today's losses in the Russell 2000 undercut the 200-day MA leaving 1,345 as next support (of which I would not be too confident of it holding).

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Time to Short?

We had the profit taking sell-off and then the bounce but is now the time for shorts to come in more aggressively? After yesterday's gapped gains there was a significant slow down in the market advance. This action presents an opportunity for shorts to attack.

The Semiconductor Index is one of the most attractive indices for shorts. The massive June bearish engulfing pattern remains dominant and offers guidance going forward. Tuesday's doji has the makings of a bearish harami cross.  Technicals are bearish and aligned in shorts favor.

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Shorts Take Profits - Bounce Opportunities Available.

Last week brought a shock to traders reared on sub-1% daily swings as profit taking losses of 2%+ swept the board on Thursday in the face of Trump uncertainty. It's a bizarre market given uncertainty is the enemy of the market and the world is full of uncertainty yet market participants were happy to bid up Trump's election.

It's not all doom and gloom. The Nasdaq made a recovery just above channel support. It might be a little early for a bounce but Friday's action should be respected. MACD, On-Balance-Volume and ADX are bearish but stochastics are at a bull market support level. If looking long side then risk is measured by a loss of 6,215.

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Small Caps Accelerate Losses

The Russell 2000 has been the index under the most pressure since peaking in July and it was the index to suffer greatest from sellers. The index is trading inside the early summer trading range and typical after a false breakout is a move back to range support, currently at 1,345. The 200-day MA will be the first port of call on the way down, which as of Wednesday's close ist at 1,369.

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