Russell 2000 ($IWM) experiences two heavy days of selling

It has been a tough start to the week for the Russell 2000 ($IWM). A bearish end to the week last has been followed by a disappointing Monday. The measured move target marked on my chart offered a launch point for a rally, but this rally quickly got overwhelmed by a former support level, turned resistance, around $178. To add to the misery, volume climbed in confirmed distribution for both Friday and Monday, and relative performance against peer indices (Nasdaq and S&P) took a sharp turn lower. There is no love for market leading Small Caps, and now have to look at 2022 lows around $160 as a possible support test.

The Nasdaq is facing its own resistance challenge around 13,350. Given the reaction in the Russell 2000, the likelihood of a reversal is quite high. If there is a bright spark, it's that volume buying has tipped in favor of accumulation, but an undercut of Friday's low would also turn all that volume into overhead supply. If the index can push above 13,400 it might help support the Russell 2000, although it would be a bit of a stretch.

The S&P is also lingering between resistance and its measured move target. It's an index in a "wait-and-see" pattern. If there is a tip of the hat, it's in favor of bears after Friday's reversal off 4,330 resistance.

With indices now looking at further declines we need to keep an eye on breadth metrics for when any such selling may stop. The Nasdaq breadth metrics are still well off an oversold state that typically mark a bottom in the index. It was the summer of 2022 when we last had a bottom of Nasdaq breadth metrics, and it could be well into 2024 before these metrics next bottom; rocky times ahead?

In the short term, the Russell 2000 ($IWM) looks like it will continue to push lower, and will probably take the S&P and Nasdaq lower. At that point, there will be little incentive for buyers to reappear until the Russell 2000 ($IWM) gets back to 2022 summer lows, although even then, I wouldn't view this as strong support.

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

Russell 2000 reverses off resistance

Image
The Russell 2000 ($IWM) has shaped a four month cup-and-handle pattern, but Friday's challenge of handle resistance was not enough to generate the follow through needed to continue the rally. Despite the losses, On-Balance-Volume remains on a 'buy' trigger and the MACD has the potential to offer a 'buy' trigger of its own on the next gain. However, losses did reverse relative performance away from Small Caps to the Nasdaq. The Nasdaq banked a small gain Friday on trading volume which was lighter than normal. While price action gathered little attention, there was a return to net bullish technicals with a new MACD trigger 'buy' to go alongside the earlier 'buy' signal in On-Balance-Volume. Thursday's bearish black candlestick was not good to see, but Friday didn't deliver the losses such a candlestick can deliver. I have added a support trendline that will offer itself as an additional buy zone. Momentum is strongly bullish.
Read more

Archive

Show more