Russell 2000 ($IWM) fails its breakout, dropping back into the prior consolidation

I wouldn't classify it as a "bull trap" as Monday's breakout in the Russell 2000 was an internal base breakout, but the drop back into this base places greater significance on support around $190. Technicals are net bullish, but On-Balance-Volume is flipping around its 20-day MA trigger line and ADX is also a little topsy turvy. The MACD might prove to be the bellwether here, and for now, there is a 'buy' trigger above the bullish zero line.

The Nasdaq is recovering from its gap down, although there wasn't too much technical damage from this gap. Symmetry could be important here, and what happened in December could repeat here. If this proves true, the next breakout won't come until March. Technicals support this thesis.

For the S&P, read the Nasdaq. Same setup, same potential outcome.

The semicondcutor index has been performing relatively methodically, moving in step sequence through its bases. There are bearish diveregences for both the MACD and CCI which blow up the breakout and complete a double top.

For tomorrow, we are probably looking at a support test of $190 in the Russell 2000 and a closure of the breakdown gaps in the S&P and Nasdaq. The Semiconductor Index is primed at resistance; any gain tomorrow would likely qualify it as a breakout, that would be positive news for both the S&P and Nasdaq.


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

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