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Upcoming "Death Cross" for Russell 2000 ($IWM)

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There was some modest buying today from the open, but volume was light and markets are below trading range support established during the latter part of 2024. It's hard to see where the buyers are going to come from given the chaos of Trump. I should add, I listened to Josh Brown's The Compound podcast and he showed an interesting chart of market returns in April-May in the year following a strong return in markets; in essence, selling to pay capital gains tax. Given the precarious nature of markets, and the possibility for this seasonal factor to play out, it's likely we have a couple more months of downward action before value buyers return. If we look at individual markets, the Russell 2000 ($IWM) is looking like the first to signal a long term shift in favor of bears with an upcoming "Death Cross" between the 50-day MA and 200-day MA - perhaps completing before the end of the week. Technicals are net bearish and the volume trend has collapsed since the st...
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Fallondpicks.com: Weekend commentary

Newsletter, Members Click HereA relatively boring week with markets retaining bullish rising channels (August-October). Where weakness crept in was a MACD 'sell' trigger in the NASDAQ as other technicals remained firm - on-balance-volume in particular supports a solid accumulation trend. The other change came in the Dow as it lost some ground (in terms of relative strength) to the NASDAQ 100. Volume climbed to register a distribution day/bearish churning on a "spinning top doji" (equal open/close with long tailed shadows - i.e. a large range between days high/lows and open/close). On-balance-volume in the Dow still favors accumulation, but its MACD trigger line is hugging tight bullish divergence support and is only a short tick away from generating a breakdown. The semiconductor index lost the 50-day MA as support, but held former bull flag resistance as support. The bearish divergence in the MACD trigger line deepened as intermediate term slow stochastics [39,1] dropped into bearish market territory. Further weakness looks likely until all slow stochastics reach oversold levels.

As for tech market internals [$NASI, $NAA50 and $BPCOMPQ]; the $NAA50 switched to a bearish cross of the 5-day EMA as its ultimate oscillator dropped below 70. There is a risk of a bearish divergence developing in the $NAA50, but support should appear when it reaches 1,250. There was no change in the $NASI and $BPCOMPQ. Finally, volatility dropped below 17, a support level on four previous tests. A move to 15 looks likely, but it could follow with a large drop in the market on a resulting surge in volatility.

I have kept my bearish stance in the Ticker Sense Blogger Sentiment Poll since September 23rd - given the NASDAQ has added some 110 points and the Dow some 470 points over this period it hadn't been the smartest of calls - but a downward spell can't be long in the offing and I remain bearish until we reach a level when tech market internals [$NASI, $NAA50 and $BPCOMPQ] are oversold.

Newsletter update:

DE gapped down after Caterpillar cut guidance. The stock featured as a Free Breakout for September 27th and October 10th and to Subscribers for August 15th and September 1st. The two Breakout plays closed for a 1% gain and a 5% loss and the Subscriber picks for a 22% gain and a 7% gain respectively.


Popular posts from this blog

Upcoming "Death Cross" for Russell 2000 ($IWM)

Image
There was some modest buying today from the open, but volume was light and markets are below trading range support established during the latter part of 2024. It's hard to see where the buyers are going to come from given the chaos of Trump. I should add, I listened to Josh Brown's The Compound podcast and he showed an interesting chart of market returns in April-May in the year following a strong return in markets; in essence, selling to pay capital gains tax. Given the precarious nature of markets, and the possibility for this seasonal factor to play out, it's likely we have a couple more months of downward action before value buyers return. If we look at individual markets, the Russell 2000 ($IWM) is looking like the first to signal a long term shift in favor of bears with an upcoming "Death Cross" between the 50-day MA and 200-day MA - perhaps completing before the end of the week. Technicals are net bearish and the volume trend has collapsed since the st...
Read more

"Dead Cat" Bounce or Something Better?

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It's still a little too early to say, but the bounce is in play and "long" is the place to be. There is a huge amount of overhead resistance and the risk:reward remains tight with moves back to Thursday's lows well within expectations. For the S&P, I would be looking for a rally back to test the 200-day MA, or a fast-falling 20-day MA, whichever is the lowest. Real supply won't kick in until 5,700 is tested, and maybe it will have the juice to get to 5,775 before volume selling makes its presence felt. As the index makes this move I expect to see a decent On-Balance-Volume 'buy' signal, alongside what will be a weak MACD 'buy'; other technicals are likely to remain bearish.
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Sell The News. Nvidia Can't Save Market - Worse To Come?

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The pre-market optimism didn't last long, but when markets are coming off an extended high it's hard for buyers to return there, even off the back of 'good news'. The Russell 2000 ($IWM) opened bang on resistance at $237, and then it was all down from there. Volume surged in confirmed distribution, leaving the 200-day MA as the next logical support level.
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