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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 ($IWM) is looking like the first to signal a long term shift in favor of bears with an upcoming "Death Cross" between the 50-day MA and 200-day MA - perhaps completing before the end of the week. Technicals are net bearish and the volume trend has collapsed since the st...
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Russell 2000 ($IWM) undercuts 200-day MA as indices struggle

It has been a rough summer for investors with markets pushing losses for the last few months. It's not all doom and gloom, with markets more range bound than permanently damaged.

The Russell 2000 ($IWM) got the pillorying today as it undercut its 200-day MA on distribution volume. Technicals are net bearish with momentum oversold, but there is another nearby price support level around $178 to lean on. While today's action sits firmly in the bearish camp, it will take a lot more selling to reverse the June 'Golden Cross' between the 50-day and 200-day MAs, and in its current oversold state there is a good chance for a bounce of merit.

The Nasdaq is still feeling the hangover from Friday's selling as it struggles to deal with the loss of its 50-day MA. Aside from On-Balance-Volume, technicals are bearish and the index is underperforming relative to the S&P. Volume remains light. Yesterday's and today's candlestick did feel like some attempt to rectify these losses, but this trading action lacked conviction.

The S&P performed a little better with a 'dragonfly' doji, this candlestick is traditionally seen as a strong reversal candidate, but momentum isn't oversold. Reversal candlesticks perform best when they occur at an oversold state./p>

One index that is an interesting juncture is the Dow Jones Industrial Average. It too finished with a bullish doji, but a doji bang on key price support. Volume did rise to mark distribution, but by holding support such volume is better seen as buying. An aggressive trader could be a buyer here, although it would be bucking the technical picture.

For the coming week, bulls we want to see the 'dragonfly' doji for Large Cap indices hold, building out to a return above the 50-day MA for the Russell 2000 ($IWM). The other chart I'm watching is the Russell 2000 ($IWM) weekly chart. It's marking a key test of the 200-week MA; a loss of this moving average in this time frame would be far more serious, but we need to wait until next week to find out.

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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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