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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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Spotting a bottom

The relentless selling continues. The good news is markets are close to a decent intermediate term bottom. The easiest way to spot this is to look at the performance of the following indicators: NASDAQ Bullish percents ($BPCOMPQ), NASDAQ Summation Index ($NASI) and NASDAQ stocks over the 50-day MA ($NAA50). These indicators are excellent measures in isolating bottoms in the NASDAQ (and for the market as a whole). They tend to lag a little in tops; these indicators peaked at the start of February (2006) which was an ideal sell for the NASDAQ, NASDAQ 100 and SOX, but was too early for the Dow, S&P and Russell 2000 which peaked last week.

The table below provides the performance of my newsletter picks in the months after a bottom occurred in these indicators. The stocks are drawn from my "Breakout" and "Subscriber [$]" lists. The "% Win" represents the proportion of stocks for that month which closed profitable. The "% gain/trade" is the average return per trade for winners and losers combined.



For comparison, I have listed the current values of these indicators:

$BPCOMPQ: 51.05
$NASI: -309
$NAA50: 728

It is clear we are not yet at a bottom, but by June we could be looking at some nice summer setups for a run in to Fall. I look for a cross of a 5-day EMA once indicators have crossed above or below certain thresholds to signal intermediate term tops or bottoms. A reversal on a weekly chart is another method which works well for the NASDAQ Bullish percents ($BPCOMPQ) and NASDAQ Summation Index ($NASI).

Luckily, once a bottom is in place for these indicators, the conditions necessary to profit from it can last a couple of months. From my own research, Breakout stocks have performed strongest with respect to the other scans I use during this period and I expect this pattern to repeat (see table). All my Breakout stocks are Free.

Not available from before, but which have performed consistently well since its introduction, I will be investigating the performance on my Trade Ideas scan stock picks. I will be interested to see if this can continue to outperform my current stock scan selections.

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

"Bull Traps" For S&P, Nasdaq and Bitcoin

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So, in one fell swoop, the S&P and Nasdaq undid all of the work of 2026 with nasty gaps lower. In the case of the Nasdaq, the ascending triangle breakout reversed into a breakdown with new 'sell' triggers in the MACD, On-Balance-Volume and +DI/-DI. The relative performance of the index to the Russell 2000 ($IWM) showed an acceleration lower after last year's declines. Only stochastics (momentum) is holding on. If one was to be more honest of what's happening, we are likely broadening out to a trading range and it will take a loss of 22K to really flag a concern for bulls. Things are a little more problematic for the S&P. There is a definite 'bull trap' in play following today's significant gap down. Volume rose in confirmed distribution, so this wasn't some fake out to get weak hands out of their positions. As with the Nasdaq, the twin lows of October/November at 6,550 carries greater significance, and we are still a long way from a test...
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Markets Rally But "Bull Traps" Hold For S&P and Bitcoin

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Markets were able to stage a recovery after Tuesday's losses, but the recovery - while newsworthy - didn't do enough to make back all of those losses, and critically, there is still a key "bull trap" in the S&P. Technicals are still mixed for this index, with momentum (stochastics) failing to return to an overbought condition, a condition required to sustain a rally.
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