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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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Bearish Evening Star for Russell 2000 as S&P 'Bull Trap' Holds

The Russell 2000 ($IWM) fulfilled its 'bearish evening star' reversal with a gap down at the open followed by a solid red candlestick. However, despite this loss, there is still plenty of room to run to support and technicals have barely shifted from their overbought state. The Russell 2000 registered a distribution day in the process, which gives bears a strong chance of registering another win on Monday.

The S&P was a different story. It didn't experience the same level of bearishness as the Russell 2000, but because it's coming off a 'bull trap' it's still under the influence of bears. Bulls did manage to successfully defend the 50-day MA, but if this 'bull trap' holds I would not expect the 50-day MA to survive a second such test over the space of days.

The Nasdaq closed its breakdown gap, but has yet to challenge resistance at 23,750. Technicals are a bit of a mixed bag, with 'sell' triggers in the MACD and +DI/-DI running contrary to prior (holding) 'buy' signals in stochastics and On-Balance-Volume. The broader pattern remains bullish, but with the squeeze in the pattern there is a risk of this playing through, and realistically, it can't really afford to head south again from here.

I had talked of a potential 'buy' in Bitcoin, but Friday's finish looks to have undermined that play, and the 'bull trap' is now in the process of testing 85K support, leaving it vulnerable to a retest of the spike low at 80K. However, if 85K support was lost, I would not expect 80K to hold and will again have to look for where buyers might decide to step in. On the positive side, the November spike low fulfilled the criteria for a capitulation. If this was the case, then I would watch for another spike low, but with a close that doesn't finish below 85K.

On a final note, weekly charts aren't flagging too many concerns, but one to watch is the Russell 2000. While the daily picture gives bulls something to work with despite the bearish evening star, the weekly chart has a spike high off an inverse hammer on what had been a resistance break. The typical follow through from this a red candlestick, which means a beash week lies ahead.

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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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