S&P and Nasdaq gives up daily breakout support, opening weekly support for a test

A triple whammy for indices and one where bears took all the plaudits. The Russell 2000 ($IWM) experienced an ugly distribution day that drove through the prior spike low. We now have a crash opportunity that could spill into the weekly time frame. I should add, we are only 7% below the 200-day MA and Russell 2000 losses generated by crashes typically touch into a 15% loss or more against the 200-day MA. However, we are in accumulate mode, so if you are an investor, then buying Small Cap stocks should see reward in the coming years; if we get down to 20% loss against the 200-day MA, then back-up-the-truck.

The Nasdaq and S&P are still *above* their 200-day MAs, so we don't have a crash watch here, but what we do have is a loss of daily support that opens up for tests of weekly support. Volume climbed to register as distribution for the S&P, but not the Nasdaq. The first of these indices to get to their 200-day MAs will be the S&P.

The Nasdaq took the smallest loss on the day. The index was rebuffed by its 50-day MA in early October and has struggled to get above this moving average since the undercut in August. The supporting MACD is on the verge of a new 'sell' trigger below the bullish mid-line (aka a "strong sell" signal). And given momentum (custom stochatics) is not oversold, but also, not above the bullish mid-line, means more downside is likely.

I would be looking for a Friday loss to pressure the weekly time frame. There won't be much positive news to lean on (as if there ever was when markets fall), but the Russell 2000 is close to a capitulation and buying into this weakness will generate gains in the long run. The S&P and Nasdaq are lagging in their declines, but are likely to recover before things truly get ugly for this indices.

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