Traders Defend 20-day MAs as Indices Finished Last Week Strong

When markets looked ready to drift lower buyers dug their heels in and defended 20-day MAs. The biggest beneficiary was the Russell 2000 ($IWM). Once again, it returned to a breakout, although the index triggered a new On-Balance-Volume 'sell' on today's light trading. On the flip side, relative performance to peer indices has accelerated in its favor, kicking off a new phase of outperformance which should last beyond Friday's surge.

Tech stocks have been the real winner in 2025, but now maybe the time to rotate this money out of tech into other indices and more diversified stocks. For example, Nasdaq relative performance moved sharply against it relative to the Russell 2000 as it attempts to challenge the early August 'bull trap'. A test of the 200-day MA would be welcome.

The other winner from Friday was the Dow Industrial Average ($INDU). It posted a new breakout with a small loss today.

Shorts are not without opportunity. Bitcoin ($BTCUSD) has come off sharply from its 'bull trap'. The asset has undercut its 20-day and 50-day MAs, and today's higher volume distribution brings it ever closer to its 200-day MA, following a new swing low for the cryptocurrency.

For tomorrow, it remains a buyer's market for lead indices with today's low volume selling offering long trade opportunities for those willing to buy the risk; I would look for Friday's lows to hold. Shorts will have the more volatile Bitcoin ($BTCUSD) to trade; sell into any move back to 20-day/50-day MAs.

---

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

"Dead Cat" Bounce or Something Better?

Image
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.
Read more

Archive

Show more