Small Caps Remain Most Under Pressure From Sellers

With a new month we have a fresh review of the monthly investor watch signals; the tables at the very end of this article show the current relationship of the indices to their 200-day MA. The S&P and Nasdaq are still in the 10% zone of historic weak action; the latter back to 1950 - the former to 1971. The Russell 2000 is still well inside the 1% of historic weak action and today's action confirmed this.

The Russell 2000 took a near 7% loss and gapped down from its swing high; this gap - if it becomes a true breakdown gap - cannot close, so it does establish a risk:reward marker for shorts to work with and  a resistance line to define a sequence of higher highs when this turns into a bull market. The question now is whether it will test the March swing low or make a new higher low? To add to the misery, selling volume increased as new distribution was registered - again, one which points in favor of short trades.

The S&P also flagged a gap down as we establish the range bounds for either a new higher or a new lower low. On-Balance-Volume, ADX and Stochastics all favor bears while the MACD sides with the bulls.

Similarly, the Nasdaq also has the range bound support and resistance levels to work with; again, a bull market on a break above resistance and a continuation of the bear market on a loss of support. 

While the Bullish Percents have also signaled a top at the 50% boundary. But, unlike the index, supporting technicals are bullish.

Going forward, we have the initial basis for a higher high and higher low sequence or continue its descent into a retest of lows (and maybe worse).

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.

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