Wednesday, March 07, 2018

Russell 2000 Passes Last Swing High as Semiconductors Breakout

The Russell 2000 may not be the index pushing all-time highs but the last four days have seen steady gains for the index - enough to generate a new relative performance advantage against strong performing Nasdaq and Nasdaq 100. Leadership from Small Caps is critical for building long-term rallies and this is a good start and an excellent confirmation of the `tweezer`bottom.


The S&P is struggling a little. Today's action came in as distribution (although not particularly strong selling). With the Russell 2000 having cleared its most recent swing high the expectation will be for Large Caps to do likewise. It may be a slow crawl higher but long positions look favored at this point


The Nasdaq will likely be the next index to make new highs. Today's candlestick engulfed the potential topping doji which removed the risk of an bearish 'evening star'.  The Nasdaq maintains its strong relative performance (but remember the Russell 2000 has outperformed it over the last four days).


Despite the strong action in the Russell 2000 it was left to the Semiconductor Index to break to new 2018 highs. This is further good news for the Nasdaq 100 and Nasdaq. Long risk is broad with stops going on a loss of 1,322 or the 50-day MA. One for the long haul.


While there isn't much for shorts to work with there is the Dow Jones Industrial Average may be offering an opportunity. It was the weakest performer on the day and it's currently up against resistance. Technicals are not net bearish but with On-Balance-Volume looking like it will only one more day of selling to trigger there is probably enough weakness to offer shorts a play with stops above Tuesday's high.


If tomorrow opens weak then look for accelerated losses in the Dow, and if selling really accelerates, then possibly a 'bull trap' in the Semiconductor Index. In a strong open, look for Semiconductors to build on their breakout and the Russell 2000 to make it five days of gains in a row.

You've now read my opinion, next read Douglas' blog.

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Dr. Declan Fallon is a blogger who trades for fun on eToro and can be copied for free.
. I invest in my pension fund as a buy-and-hold.
 
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