'Bull traps' threaten Nasdaq and Russell 2000

What goes up may come down, or at least, the nascent breakouts in the Nasdaq and Russell 2000 now find themselves on the wrong side of support. It hasn't been a total collapse, selling volume was down on Friday's buying, and the potential for a recovery is quite high.  But for this to happen, sellers can't be allowed to build up any momentum.  As things stand, the Nasdaq and Russell 2000 now find themselves back inside the prior consolidation.

The Russell 2000 is underpeforming the Nasdaq, so it's the most vulnerable to further selling.  Even if the 'bull trap' is confirmed, I would still look for the potential of the 20-day MA to play as support.


The loss of the breakout in the Nasdaq didn't do too much damage to the supporting technical picture, but I wouldn't want to see too much of a move away from its 200-day MA. The index doesn't have the benefit of the 'golden cross' between 50-day and 200-day MAs, so it might take a second wave of down-and-up before there is a confirmed breakout. 



The S&P didn't have a breakout to lose, so there would have been no technical alert for this index to reverse.  It's as you were for the index, but one thing I like is the pending 'golden cross' between the 50-day and 200-day MAs which might be the driver for a breakout.  In such a scenario, I would be looking for the Russell 2000 to lead out and the S&P to follow.


As a final note, the Semiconductor Index has also drifted below its breakout level but there is also a pending bullish cross between 50-day and 200-day MAs. 


For the rest of the week, if ex-breakout indices are able to hold on to moving average support - and this could be any of 20-day, 50-day or 200-day MAs - then I wouldn't be too worried about today's breakout losses.

Get a 50% discount on my Roth IRA with a 14-day free trial. Use coupon code fallondpicks at Get My Trades to get the discount.

---

Follow Me on Twitter


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

Popular posts from this blog

S&P "Bull Trap"?

Image
I thought there was sufficient evidence to argue against a "bull trap" in the S&P, but it would appear the market wasn't interested in such thoughts and sellers were quick to reverse the initial push above 4,200.  Adding to the pain were new 'sell' triggers in MACD and On-Balance-Volume, although the former occurred above the 'bullish' zero line, making it a weak signal. Selling volume ranked as distribution as selling momentum picked up speed.  The index is also underperforming relative to the Russell 2000. 
Read more

"Black Candlesticks" are a concern for the S&P and Nasdaq

Image
A bright start for bulls on the back of positive $NVDA earnings wasn't enough to generate a day of meaningful gains.  However, it did help stall the losses of the last couple of days. The Nasdaq was the biggest beneficiary of today's action, but not enough to see an end-of-day finish that cleared last week's swing high, nor delivery of a large white candlestick, despite the morning breakout gap.  Technicals are net bullish and relative performance against the S&P has become consistently stronger since the start of May.  While today's candlestick I would view as typically 'bearish', today's volume ranked as confirmed accumulation (bullish). Overall, I would be looking for higher prices from here. 
Read more

Round 2 for the bearish "black" candlestick in S&P and Nasdaq

Image
The Nasdaq started brightly but ended up closing below its open price, but above yesterday's close. The S&P did something similar, although the intraday range is narrower. These two setups are somewhat complicated by the new 'buy' triggers in On-Balance-Volume for both the Nasdaq and S&P. And the new MACD trigger 'buy' for the S&P. Price action is key, so I would expect the candlestick to trump the technical picture; watch for lower prices tomorrow.
Read more

Archive

Show more