Russell 2000 ($IWM) sees break of 200-week MA for a fourth time in 2 years

While the index has recovered from breaks of its 200-week MA before, every such test (and break) of the moving average increases the chance of a flip from a level of support to resistance. Supporting technicals for the index are next bearish, but more importantly, since the sharp shift in relative performance against the S&P in March, the index has struggled to regain the initiative. More importantly, the summer rally barely registered in terms of relative performance. This means the likelihood for a move to an oversold state is high, and therefore further losses can be expected here.

The Nasdaq will be next to see a test of support as 13,000 comes into view. Unlike the Russell 2000 ($IWM), it has overbought momentum and (just about) bullish trend strength. On-balance-volume has moved to a 'sell' trigger, following the earlier 'sell' trigger in the MACD. The 50-week MA has created a 'golden cross' with the 200-week MA, albeit from a relatively flat starting point. It's still all to play for, but given the aforementioned action in the Russell 2000, what is likely to come next is not good news.

The S&P weekly chart sits in a similar predictament to the Nasdaq, with 4,325 support key. It's managing 'sell' triggers in the MACD and On-Balance-Volume to go with more bullish signals in ADX and Momentum. It does have a key advantage in that it's outperforming the Russell 2000, which means that if buyers do emerge to support the indices, they will be buying into the S&P first.

It's two ticks in the bull column for the S&P and Nasdaq on the weekly chart, and one tick in the bearish column for the Russell 2000 ($IWM). Unfortunately, its small cap stocks that do most of the talking when it comes down to market leadership and they are saying 'sell'. At the very least, look for support tests in the S&P and Nasdaq and then depending what the Russell 2000 is doing then will give us an idea as to what happens next.

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

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