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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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A weak start to the week, but this is not important

We don't want to dwell too much on today's action, although at the same time, we don't want the selling to get away from us. Sellers were able to push markets lower on light volume. 

The Nasdaq drifted back to support, but was able to hold the prior support level (at least, support before the 'black' candlestick appeared).  There was a 'sell' trigger in On-Balance-Volume but there is a large degree of whipsaw in this indicator since the swing low in November.  There is a modest uptick in relative outperformance against the S&P which may help the index build out from its November bottom, but this nascent trend needs to continue.


The S&P undercut its 200-day MA but hasn't yet challenged rising support defined by the swing lows from October and November.  Despite today's selling, there wasn't any technical change.  Consider this status quo for the index.

Speaking of Large Cap indices. The Dow Industrials Average returned below its breakout level (defined by the August High) but only has a weak 'sell' sell signal in the MACD to consider.  Today's selling ranked as dsitribution but if the index can shape a 'handle' it will offer a solid bullish setup for 2023. 


If there is a smidgen of concern it's the Russell 2000 ($IWM).  Today's action could be seen as a 'breakdown' or it could be seen as a successful defense of support (marked by the swing lows from the October low) - although if it's the latter, then there can't be another day of losses (or at least one where the end-of-day close respects rising support).  Today's selling as ranked as distribution and the bearish 'inverse' hammer from early November remains influential.  For the day-to-day action, we won't want to see a close below rising support, although intraday violations are okay. 

While today's start isn't great for bulls, there is a still a good chance we could see these losses reversed by Friday's close of business.  The Russell 2000 ($IWM) is looking most vulnerable for the day-to-day movers-and-shakers, but let's see what the rest of the week brings. 

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Investments are held in a pension fund on a buy-and-hold strategy.

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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Sell The News. Nvidia Can't Save Market - Worse To Come?

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The pre-market optimism didn't last long, but when markets are coming off an extended high it's hard for buyers to return there, even off the back of 'good news'. The Russell 2000 ($IWM) opened bang on resistance at $237, and then it was all down from there. Volume surged in confirmed distribution, leaving the 200-day MA as the next logical support level.
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