The Russell 2000 ($IWM) had galloped ahead on a week of strong gains, only to gallop too far and baulk at the last fence. The big inverse hammer and spike high on Monday reflected the indecision at new all-time highs. Today was a bit of a pause (in either direction), and while it didn't trade the volume of yesterday, technicals remain net bullish. What I liked was the lack of follow through lower on what should have been a powerful reversal candlestick.

Since the successful test of 20-day MAs earlier this week it has been all upside. The Russell 2000 ($IWM) has been the clear winner, although the S&P and Nasdaq have enjoyed more modest gains. If we look at the weekly chart of the Russell 2000 ($IWM) we see a real-body candlestick recovery of all of the prior week's losses with only the spike high to go. With the existing upward channel dating back to 2023 still intact, we can now look for an accelerated move higher to take the index out of this channel and into a new phase for its bull market. Support for this move comes from an upside trend in On-Balance-Volume and strong (stochastic) momentum. There is aslo an uptick in relative performance over the S&P.

The first step on the move back to highs for indices started today, but it's going to take a concerted effort by bulls to get there. The concern is that we are looking at a zig-zag move lower, and that today's gain will fade out by the weekend. But the bounce off support has begun.

After days of selling triggered by escalating events in Ukraine there was at least a modicum of relief for markets as buyers stepped in at 20-day MAs across lead indices. Because of this, breakout gaps remain intact and markets have the opportunity to return to their highs. Risk:reward can be worked off the lows (lowest low of the last 3 days). Those of a bearish persuassion may view recent gaps as potential "island reversals", but if these prove true, then such overhead gaps can't close. The Russell 2000 ($IWM) had produced the biggest breakout gap, but also suffered the hardest selling post-election. Today's defense of the 20-day MA come with prior 'sell' triggers in the MACD (a weak signal from above the bullish zero line), and On-Balance-Volume. There remains an ongoing battle between Small Caps and Nasdaq in the relative performance stakes and this hasn't been resolved in favor of one or the other.

With the election over the hangover has kicked in. Markets liked the result, but it was too much too fast. Sizable breakout gaps have delivered moves back into these zones. True breakout gaps don't close, so the losses we have seen can't go much farther if we *are* looking a breakouts, and I think these are true breakouts. The Russell 2000 ($IWM) has the most room to move before it closes the gap. the 20-day MA is there to help and technicals are mostly bullish. Small Caps should do well under Trump as deregulation kicks in.

After indices ailed at resistance for so long traders made the decisive move, buying stocks with glee on Trump's victory. Most of the gains were achieved pre-market on the opening gap, but this gap offers substantial wiggle room should profit taking kick in. Wednesday's action should mark a clear breakout gap - and breakout gaps can't close - so even if we see a move inside the gap, the risk:reward should be easy to establish for long trades. What I will also want to see is an improvement in breadth metrics, particular the Nasdaq Summation Index ($NASI). It was pointing towards a larger loss for the Nasdaq and could yet still forecast one. What doesn't happen now could happen in the New Year once the seasonal "good will" factor wears off.

The Nasdaq had looked primed for a breakout but there was a trend breakdown last week. The index has returned to its base with a break in its 20-day MA; the 50-day MA is its next port of call. Technicals are mixed; On-Balance-Volume is still moving strongly in bulls favor, and I thought this would be the driver for the breakout. Momentum is solid and short term is at a pullback 'buy'. However, it's the trend break on the back of a (weak) MACD 'sell' trigger that is of greater concern.