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. 

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

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