Monday, April 27, 2020

Small Caps Finally Breaking Out

For the first time during this crash, Small Caps ($IWM) have begun to swing into a position of leadership with a breakout. The April 'bull trap' in this index has been negated, but the index now finds itself up against its 50-day MA. Despite the relative performance gain the index hasn't turned net positive in technicals with stochastics still below the bullish line.


The S&P did edge a mini-breakout above the April swing high, but there is still resistance from the February swing low to contend with. There was a sharp drop in relative performance as core technicals remain positive. The index has cleared its 50-day MA but the aforementioned resistance could prove problematic.


The Nasdaq finished with a doji which may turn into a bearish evening 'star' if there is a gap down tomorrow. However, with the Russell 2000 breaking out it's hard to see this index swinging in favor
of bears but let the market be your guide.


If 'bulls' are going to in this battle then the Russell 2000 has to start acquiring some legs and moving higher. The Nasdaq has perhaps the best chance for 'bears', but it requires a gap lower (which would likely kill the Russell 2000) to confirm the bearish evening star.  The S&P is caught in the middle, but given today's action I would edge in favour of bulls.


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

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