Russell 2000 ($IWM) Drifts Off Highs But Holds Breakout

Wednesday delivered the long awaited breakout in the Russell 2000 ($IWM), and while we didn't get the follow through higher, we did see buyers maintain breakout support. Friday's selling volume ranked as distribution, but it was not particularly heavy volume overall. Technicals didn't lose much ground over the two days of selling and remained net bullish.

<1--more-->

The S&P is looking a little vulnerable with Friday's doji forming a bearish 'harami cross' against Thursday's broad candle - a reliable reversal candlestick pattern. Adding to this is an overbought market condition alongside a new relative reversal against the Nasdaq. Look to premarket for leads; a gap down at the open would effectively set up a short play.

The Nasdaq also closed with a bearish harami cross just below resistance. Like the S&P, it will be vulnerable to a gap down. Needless to say, look to premarket for guidance.

Another chart to watch is the weekly S&P. We won't have confirmation until Friday's close, but if we start the week poorly there is a risk for a "bull trap" that could deliver weeks of underperformance.

While the weekly Nasdaq pegged channel resistance, and is at a position where sellers naturally find a point of attack.

So, I would be expecting a gap down in the Nasdaq and S&P, but if this fails to materialize, then the conditions are there for a big gain that delivers a breakout in the Nasdaq, a confirmation of the Russell 2000 ($IWM) breakout, and a continuation of the S&P rally.

---

Follow Me on Twitter


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

Popular posts from this blog

Upcoming "Death Cross" for Russell 2000 ($IWM)

Image
There was some modest buying today from the open, but volume was light and markets are below trading range support established during the latter part of 2024. It's hard to see where the buyers are going to come from given the chaos of Trump. I should add, I listened to Josh Brown's The Compound podcast and he showed an interesting chart of market returns in April-May in the year following a strong return in markets; in essence, selling to pay capital gains tax. Given the precarious nature of markets, and the possibility for this seasonal factor to play out, it's likely we have a couple more months of downward action before value buyers return. If we look at individual markets, the Russell 2000 ($IWM) is looking like the first to signal a long term shift in favor of bears with an upcoming "Death Cross" between the 50-day MA and 200-day MA - perhaps completing before the end of the week. Technicals are net bearish and the volume trend has collapsed since the st...
Read more

Friday's gap downs bring indices close to support. Semiconductor Index at 200-day MA.

Image
Friday's big gaps lower have the potential to become breakdown gaps, but for now, the near term oversell has for a possible move into the gap price vacuum. The index most likely to achieve this in the coming days is the Russell 2000 ($IWM). The Russell 2000 ($IWM) finished with a neutral doji, just above its 50-day MA and in a thick band of support between $207.50 and $210 marked by the summer swing highs. Technicals have followed price action with new 'sell' triggers in On-Balance-Volume and ADX, but intermediate term stochastics haven't reached the mid-line that is typical support in bull markets. Aggressive bulls can look for a move to test the underside of the 20-day MA. The S&P was unable to hold its 50-day MA on Friday's open, and instead found itself toying with the May swing high. More significant support is likely to be found around 5,265, so if there is an undercut of Friday's low then this will be the next port of call. More concer...
Read more

S&P 'Bull Trap' Prevails As Recent Challenge Fails

Image
We are two-for-two for the S&P pushing beyond 6,100 resistance - this week was nearly an exact repeat of last week - just as things looked ready to push on, sellers returned. Supporting technicals are net bullish, which leaves just price to do its thing. What happens at converged 20-day/50-day MAs will be important, because there can only be one winner here.
Read more

Archive

Show more