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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 Here Bears made a follow on push to Monday's losses, but bulls were able to make enough of a stand to keep certain support levels intact. The NASDAQ broke below channel support but was able to hold former October resistance, now support, of 2,381. This support was undermined a little by the reversal of relative strength compared to large caps [S&P]; markets don't perform as well when large caps are leading. The Dow was less lucky as was unable to regain former channel suport but was able to gain against the NASDAQ 100 with respect to relative strength. However, the NASDAQ 100 was able to hold its channel support (unlike the NASDAQ) and even though it gave up position relative to small caps [Russell 2000] it still holds in favor of the bulls. The Russell 2000 was also able to hold channel support as it continues to perform above expectations (my expectations were for a sharp out performance from large caps relative to small caps). It also held its ground against the NASDAQ, keeping it as the leading index: {Small caps > Large caps > Tech Indices: Neutral and weakening}. The semiconductor index held support of the 50-day and 200-day (and perhaps the 20-day) MAs, but there was an apparent large tick error for the day.

The tick error in the semiconductor index weakened the technicals significantly (but again, this looks to be a reaction to the tick error). Other indices maintained their weakening technical picture as bearish divergences in the MACDs of the NASDAQ, Dow, NASDAQ 100 (to a lesser degree), and S&P held. On-balance-volume of these indices hold to strong accumulation, but bullish trend strength (+DI) is wavering, so it won't be long before bears are calling the shots (if not doing so already).

The key bearish action remains in the tech market internals [$NASI, $NAA50 and $BPCOMPQ] as long standing bearish divergences in their MACDs hold (we are now heading into their third month of existence). The bullish divergences from May-July sparked the latter year rally, there is good reason to argue for the reverse happening now. Contributing to this weakness is deeply oversold volatility; a sharp spike in this indicator usually corresponds to a fearful period in the markets and sharp downside. Adding to the weakness were bearish crosses of the 5-day EMAs in the $NAA50 and $BPCOMPQ.

There should be no surprise to see me bearish for the Ticker Sense Blogger Sentiment Poll.


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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"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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