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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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Friday's selling threatens major support in Russell 2000 (and maybe S&P too...)

Tricky times for markets, but for the Russell 2000 in particular. Since the start of the Silicon Valley Bank crisis we have seen a rapid deterioration in the state of the markets, and the vulnerability for a crash, as crashes occur not from highs, but when markets are oversold - and that's where we are now. However, last summer's low is a low of consequence and import, so I would see any additional loss as a temporary loss that should quickly reverse and offer excellent buying opportunities for those willing to take the risk (as a long term investor).  Where it gets more questionable, is how far any such sell off/crash could go. 

But before we get there, we need to see a loss of existing support.  For the Russell 2000 ($IWM), this is the $170 level. Selling volume surged last week in confirmed distribution and technicals are net bearish. Relative performance is also accelerating lower. 


The next index on the line is the S&P.  I had redrawn resistance based off the angle of support, and this resistance was tested and rebuffed on Friday.  If the Russell 2000 ($IWM) loses $170 support, then I would be looking for a similar loss of 3,800 in the S&P, even if the S&P is still over 100 points away from this support level. 

The Nasdaq is the only bright-spark of lead indices. It had managed to break resistance on Thursday, and Friday's selling finished with a neutral doji that held on to this breakout.  But, if the S&P and the Russell 2000 breakdown, then it would be hard for the Nasdaq to cling on.


For tomorrow, I would be looking for a test of $170 in the $IWM. An intraday violation would be okay, its an end-of-day close that would be the concern here.  If that happens, then I would expect the S&P and Nasdaq to follow suit soon afterwards.  And when that happens, panic could set in. However, the next major bottom is probably close; bear market lows typically come in 2 1/2 years from the prior peak (all-time high).  For us, that high was in November 2021, so if we are looking for the low of this bear decline, then it could be early 2024 by a standard bear count, but it's likely to be sooner.  Also, I do not see loses getting anywhere near the generational low of March 2009.

So, where can we expect to see markets find support *if* there is a crash.  For me, I would look to:

Russell 2000 ($IWM): $110; S&P: 3,000; Nasdaq: 8,000.

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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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