The S&P and Nasdaq are rebuffed at 50-day MAs, but Russell ($IWM) has potential

Friday's brief recovery for the S&P and Nasdaq quickly found itself running into trouble at their respective 50-day MAs. It was a little different for the Nasdaq in that it started the day at its 50-day MA, but the early rally stalled out after it closed the Thursday gap down.

The Nasdaq experienced a new 'sell' trigger in slow stochastics and an underperformance relative to the S&P, joining the earlier 'sell' trigger in On-Balance-Volume. Given that, I would be looking for some weakness early next week, but a close above Friday's doji high would negate the weakness of that candlestick.

The S&P, like the Nasdaq, closed Friday with a similar doji but did so from below its 50-day MA, adding considerable resistance pressure; stochastics now undercut the (bullish) mid-line with the ADX (trend metric) in flux. The S&P is outperforming the Russell 2000, so there is a chance it could make up this weakness on Monday, but caution is advised.

The Russell 2000 ($IWM) was the only index to lose ground on Friday, but it may be in the best position for the start on the week if you are a bull. However, the selling was enough to see a new 'sell' trigger in the MACD from below the bullish mid-line for the indicator, usually a sign of worse to come.

Where we need to be careful is the weekly chart for the Russell 2000 ($IWM). We have a convergence of 20-week, 50-week and 200-week MAs with an ugly bearish candlestick to close the week. Should the week close (and we have until Friday before we see this) below its 200-week MA, then there is the potential for a whole lot of pain.

While Friday's trading had more bearish than bullish tones, the Russell 2000 ($IWM) - the most bearish of indices - looks best placed to benefit from buying given its proximity to major support of its 200-day MA.  We need to be watchful of the picture on the weekly timeframe, but there are five days of trading before this comes into play. 

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

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

Being "Right" but still losing...

Image
I'm trying the Topstep Trader Combine as a sampler to day trading and it's an interesting setup with minimal outlay costs to get started. I'm not a huge fan of their platform UI but everything else has been pretty good so far. Today was one of those days where I waiting (and waiting) for the profit taking to kick in, but by the time sellers made their appearance I had reached my loss limit for the day and so that, was that. You can see all of my whipsaw trades here. For the record, I only work off price action, looking at support/resistance and tells like rapid stop take outs, usually a good sign for a reversal.
Read more

Big bearish engulfing patterns as positive start negated

Image
It was a setting up to be a low key day, but come the afternoon, sellers pounced and drove markets down hard after doubts raised on future rate cuts. Fed news wasn't the key takeaway, but the loss of support was. The S&P was hardest hit, not because of the percentage loss, but because of the volatility relative to recent trading action. Today marked a clear breakdown of trendline support. It should be noted, the presence of the 50-day MA offers a point of defence but today's loss does not mean we will see a crash; a time-led consolidation seems more likely. Technically, the MACD accelerated its losses and there was a fresh 'sell' in On-Balance-Volume.
Read more

Archive

Show more