Monday, March 23, 2020

Russell 2000 and Nasdaq Continue to Seek A Bottom

While the S&P took another, smaller, step lower. Both the Nasdaq and Russell 2000 seem to have stabilized around last week's trading range. Today's volume was lighter than Friday but remained very heavy overall. Traders willing to use the current low as a risk measure may find enough room for a relief-rally trade, but it won't be one for the feint of heart, and could easily be stopped out tomorrow.

In the case of the Russell 2000 ETF, $IWM, the trade stop is below $95.69, but with an ATR of 7.84 you would ideally be looking at a stop closer to $83s to allow for volatility - making the typical risk:reward worthless. So, with that caveat, buyers want to be close to the exit button.


The Nasdaq low of 6,631 is where risk:reward is measured; again, an ATR of 433, rules out the volatility driven stop but prices are congesting in the 6,650 and 7,350 zone.


The S&P shed nearly 3% which dropped the index out of last week's prior congestion. As with the Nasdaq and Russell 2000, trading volume was lighter than Friday's.


Nasdaq bullish percents continue to shape a bottom which is another tick in the swing low development for the parent Nasdaq.


Also, the Percentage of Nasdaq Stocks above the 50-day MA has seen a 'buy' trigger in the MACD and CCI.


For tomorrow, look to the Nasdaq to continue its recovery - and from that - the Russell 2000 too. Traders may wish to wait for the first 30 minutes of trading to establish a range, then buy a break of that range should it move higher.


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

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Investments are held in a pension fund on a buy-and-hold strategy.
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