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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 ($IWM) is looking like the first to signal a long term shift in favor of bears with an upcoming "Death Cross" between the 50-day MA and 200-day MA - perhaps completing before the end of the week. Technicals are net bearish and the volume trend has collapsed since the st...
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Has The Semiconductor Index ($SOX) Peaked?

It has been a volatile past few days since the New Year rolled in and Markerts have been making big moves up and down over the space of days. The one index to watch for the coming couple of weeks is the Semiconductor Index ($SOX). The gains to new highs is narrowing the retracements zones with 5,400s coming into play more as a pullback target.

The Russell 2000 ($IWM) has returned to net bullish technicals with a new breakout on higher volume accumulation. This is a solid bullish move from an index that has struggled to build a long running rally. The index is 15.1% above its 200-day MA, that places it in the 10% zone of historic price extremes. If it gets to 17%, then it will reach a 5% price extreme, last seen in April 2021.

The S&P is holding its breakout, a breakout that is 9.6% above its 200-day MA, but is not yet extended. The equal weighted S&P is doing significantly better and if looking beyond tech stocks there is opportunity.

The Nasdaq has edged a breakout from its symmetrical triangle, but it's a modest breakout. Technicals are net bullish, but it has been struggling since the latter part of 2024. Finding buyers has proved problematic, even as the Semiconductor Index posts new highs.

What may help tech indices is Bitcoin. After surviving the 'bear flag' it move into a trading range, which now finds itself (successfully) testing converged 20-day and 50-day MAs, with technicals net bullish.

For the rest of the week, we want to see bulls hold the gains so as to sustain the long standing weekly rallies in lead indices. It does like the Russell 2000, equal-weighted S&P, and Dow Jones Industrial Average (not covered here) will do most of the leg work, with the regular S&P there to lend support as needed. The Semiconductor Index looks to be running on fumes, and is at risk of a blowoff top. November's index losses failed to deliver the value buying opportunities I had hoped for, but momentum traders now have something to work with.

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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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