Small Cap Weakness Spreads
Sellers took a third day of selling out of the Russell 2000 and this weakness made its way to the S&P and Nasdaq. The selling is more problematic for the Russell 2000 because there is a genuine lack of conviction from traders wanting to pick up an index which is trading at a deep discount to its peers.
While the Russell 2000 is struggling the S&P is knocking on the door of all-time highs. Profit taking at resistance looks the most likely cause of today's action but it will be important there is no acceleration into a deeper loss undercutting moving averages; 20-day and 50-day MAs to begin with.
The Nasdaq is just behind the S&P but is close enough to all-time highs to mark today's selling as profit taking too. The index finished on its 50-day MA, so what happens here will act as a guide for the S&P.
The Semiconductor Index is still caught in a bit of a no mans land with the recent consolidation bound by 20-day and 50-day MAs. If this is able to push above the 50-day MA I think it could go on a nice run, but it will need to clear the double-black-candlestick pairing at 1,441 soon enough.
The Dow Transports and Industrial average relationship continues to struggle with new lows in the trend. The lower Transports-to-Utilities ratio is similarly pointing to a bearish outlook for stocks.
Markets are too overbought to consider themselves at risk of a crash, but a continuation of this long standing consolidation does look a more likely outcome. Moving averages will play as a first stop for support, with May lows the last boundary for maintaining the consolidation. For now, stocks are a hold, but there is little to suggest a fresh buying opportunity is available.
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.
While the Russell 2000 is struggling the S&P is knocking on the door of all-time highs. Profit taking at resistance looks the most likely cause of today's action but it will be important there is no acceleration into a deeper loss undercutting moving averages; 20-day and 50-day MAs to begin with.
The Nasdaq is just behind the S&P but is close enough to all-time highs to mark today's selling as profit taking too. The index finished on its 50-day MA, so what happens here will act as a guide for the S&P.
The Semiconductor Index is still caught in a bit of a no mans land with the recent consolidation bound by 20-day and 50-day MAs. If this is able to push above the 50-day MA I think it could go on a nice run, but it will need to clear the double-black-candlestick pairing at 1,441 soon enough.
The Dow Transports and Industrial average relationship continues to struggle with new lows in the trend. The lower Transports-to-Utilities ratio is similarly pointing to a bearish outlook for stocks.
Markets are too overbought to consider themselves at risk of a crash, but a continuation of this long standing consolidation does look a more likely outcome. Moving averages will play as a first stop for support, with May lows the last boundary for maintaining the consolidation. For now, stocks are a hold, but there is little to suggest a fresh buying opportunity is available.
You've now read my opinion, next read Douglas' blog.
---
Accepting KIVA gift certificates to help support the work on this blog. All certificates gifted are converted into loans for those who need the help more.
Follow Me on Twitter
Investments are held in a pension fund on a buy-and-hold strategy.
