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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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Sellers Accelerate Action As Confirmed Distribution Kicks In

Aside from Bitcoin, we are not seeing too much technical damage, but we are seeing a pick up in the volume of seeling. Moving averages will be key in the near term before we have to start looking at horizontal price support and swing lows.

The Russell 2000 ($IWM) undercut its 20-day MA, but hasn't yet challenged support defined by the December swing high. The MACD is on a 'sell' trigger and +DI/DI and On-Balance-Volume will likely do the same Monday if selling continues. Friday's selling registered as confirmed distribution, which is a worry for Monday. It's the strongest index, but if this falls under $257 we would likely be looking at a new trading range bound by $245 and $270 that could last a number of months.

The S&P has drifted a little, but finished with another doji sitting inside the spike low of Thursday's action. For a loss, it's probably the most bullish loss it could otherwise be. There 'sell' triggers for +DI/-DI and On-Balance-Volume, but Stochastics are overbought - a requirement for a breakout - and relative performance has enjoyed an uptick, so it's attracting money over its peers.

The Nasdaq was not quite as bullish as the S&P, and did register a distribution day, but it has the benefit of the ascending bullish triangle and has so far defended 50-day MA support. Of technicals, only +DI/-DI is on a 'sell' trigger but it has dropped out of an overbought momentum state.

The asset undergoing the most pressure is Bitcoin. The failure to build a right-hand-side base off the January breakout has instead turned into a scramble to the bottom on net bearish technicals, but no distirbution (a small relief). I have drawn in a measured move lower, but absolute moves down aren't the best, but a relative measured move lower would set a target around 62.75K. If it does get there, it would be an attractive buy.

The weekly chart for Bitcoin shows the challenge that lays ahead. The 200-week MA, currently around 53K, is something that may get a spike low test as part of the measured move target. The (upside) break of this moving average was done in early 2023, but it hasn't tested it since.

Friday's selling wasn't great news for bulls, but there may be enough to offer a bullish trade on Monday. It will likely only be a day trade (at least until resistance is tested), but the risk is current bullish patterns for the S&P and Nasdaq trade 'out' of the pattern into a neutral trading ranges.

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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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"Bull Traps" For S&P, Nasdaq and Bitcoin

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So, in one fell swoop, the S&P and Nasdaq undid all of the work of 2026 with nasty gaps lower. In the case of the Nasdaq, the ascending triangle breakout reversed into a breakdown with new 'sell' triggers in the MACD, On-Balance-Volume and +DI/-DI. The relative performance of the index to the Russell 2000 ($IWM) showed an acceleration lower after last year's declines. Only stochastics (momentum) is holding on. If one was to be more honest of what's happening, we are likely broadening out to a trading range and it will take a loss of 22K to really flag a concern for bulls. Things are a little more problematic for the S&P. There is a definite 'bull trap' in play following today's significant gap down. Volume rose in confirmed distribution, so this wasn't some fake out to get weak hands out of their positions. As with the Nasdaq, the twin lows of October/November at 6,550 carries greater significance, and we are still a long way from a test...
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