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

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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 ($IWM) is looking like the first to signal a long term shift in favor of bears with an upcoming "Death Cross" between the 50-day MA and 200-day MA - perhaps completing before the end of the week. Technicals are net bearish and the volume trend has collapsed since the st...
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Blog Traffic Picks Up As S&P And Russell 2000 ($IWM) Break Weekly Trendlines

I know there is the smell of fear in the air when I see my readership double as we reach a point where weekly chart factors come into play. Up until last week, markets have enjoyed steady advances since the swing lows of 2023, but that has started to change.

It's not all doom-and-gloom, but we have to consider a significant change is in play with respect to market trends.

The S&P cracked below its trend line on higher volume distribution with earlier 'sell' triggers in the MACD, On-Balance-Volume, and -DI/+DI. On the plus side, there was a successful test of the 50-week MA that may present an opportunity for a 'bear trap' *if* it can return above the trendline. There is also horizontal support around 5,700. Next week will be about holding these last points of support and not seeing further losses.

Likewise, the Russell 2000 ($IWM) also saw a trendline loss from a relatively new bull trend. There should be good support at $195, which is also near its 200-week MA (if even that's a thing...). If we fall below $195, then a move back to $160 becomes a strong possibility. Unlike for the S&P, technicals are net negative.

Indices that are offering a 'buy' opportunity on weekly time frames are the Dow Industrial Average and Nasdaq.

The Dow Industrial Average finished the week on its 2023 trend support on mixed technical strength; 'sell' triggers in MACD and +DI/-DI vs 'buy' conditions in On-Balance-Volume and Stochastics (momentum).

The Nasdaq lightly tagged 2023 trend support and may see a second test of support by the end of this week. This week's test also coincided with a successful test of the 50-week MA. On the downside, this week's loss came on higher volume distribution but remains one of the more bullish indices.

Where things get more ugly is in market breadth. We have 25% of Nasdaq stocks above their 50-day MA, and only 33% above their 200-day MA. 38% of Nasdaq Stocks are on point-n-figure 'buy' signal. On a slightly more positive front, the Nasdaq Summation Index is at -500, which has marked major lows in the past, but can fall below -1,000 before a bottom is marked.

For the S&P, we have 47% above their 50-day MA and 52% above their 200-day MA, with 42% on point-n-figure 'buy' signal. These are more neutral readings and could go either way.

While I think markets will continue to head lower in the near term, if you are looking for a more bullish outlook, check out J.C. Parets. Nobody knows which way the market will break, but you can prepare for it. When markets are above their 200-day MA you look to take profit; when they are below, you buy/accumulate.

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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

"Dead Cat" Bounce or Something Better?

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It's still a little too early to say, but the bounce is in play and "long" is the place to be. There is a huge amount of overhead resistance and the risk:reward remains tight with moves back to Thursday's lows well within expectations. For the S&P, I would be looking for a rally back to test the 200-day MA, or a fast-falling 20-day MA, whichever is the lowest. Real supply won't kick in until 5,700 is tested, and maybe it will have the juice to get to 5,775 before volume selling makes its presence felt. As the index makes this move I expect to see a decent On-Balance-Volume 'buy' signal, alongside what will be a weak MACD 'buy'; other technicals are likely to remain bearish.
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Sell The News. Nvidia Can't Save Market - Worse To Come?

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The pre-market optimism didn't last long, but when markets are coming off an extended high it's hard for buyers to return there, even off the back of 'good news'. The Russell 2000 ($IWM) opened bang on resistance at $237, and then it was all down from there. Volume surged in confirmed distribution, leaving the 200-day MA as the next logical support level.
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