Weekly Market Commentary: Small Caps Feel The Heat

Thursday's gains belonged to the Russell 2000, but all of that was undone by Friday's selling. The Russell 2000 is approaching channel support and is likely to see a test on Monday. Stochastics are not yet oversold.

However, the Russell 2000 is still showing a 'bull trap' on the weekly time frame.

Other indices remain range bound within a broader bullish advance. The Nasdaq is a prime example, with the index making a return to 3,500 support, but as part of a larger bullish move.

The Nasdaq Summation Index undercut the last two swing lows and is on course to cut the zero line. However, tradeworthy swing lows occur below -500 with major swing lows below -800; by this measure there still is some room before something tradeable emerges.

The NYSE Summation Index is in swing territory, although it could drop to -500 before bouncing.

While the weekly S&P breaks rising channel support, next target is 1,550 (the next rising trend dating back to the middle of 2011).

Next week is set up for further losses, but indices are positioned for a potential bounce or 'bear trap'.


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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com.
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