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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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Split Markets At 200-day MAs

It's hard to know what will come next as some markets work bounces off their 200-day MAs, while others struggle below it.

The Russell 2000 ($IWM) successfully managed a test of its 200-day MA before rallying, while also leaving a 'bear trap' at $245. Buyers who took advantage of $245 will be sitting pretty, although traders with a shorter time frame may wish to site this out. Today's test of the 20-day MA may instead offer a shorting opportunity, particularly if there is a gap down on Thursday's open. Technicals are slowly recovering, although the MACD trigger 'buy' is a weak signal given the crossover below the bullish zero line.

The equal weighted S&P managed a picture perfect test of its 200-day MA, but the bounce off the moving average is throwing some spike highs below 7,900 that leaves it vulnerable to another run at its 200-day MA. Technicals are net negative, although the index is starting to outperform against its weighted partner.

Where we have doubts is the regular S&P. The index undercut its 200-day MA last week and the proliferation of spike highs near this average points to supply issues. The index is feeling the pressure, although it still clings to support of the November swing low.

Taking this a step further, the Nasdaq has sliced through both 200-day MA and November swing lows to leave what looks to be the start of a new bear market for the index. Technicals are net bearish, which adds to the pressure. Last November I had drawn a projected measured move target for the index down around 20.3K; a move that would place it around the 15% of historic weak action, altough ideally we want to see an 18% undercut of the 200-day MA to get a good buying signal that puts it in the 10% zone.

Another index at an inflection point is the Dow Industrials Average. It had successfully bounced off support of October lows having earlier lost its 200-day MA, but on the move back to the 200-day MA it has started to create spike highs that suggests sellers and shorts dominate on the test. If it can clear its 200-day MA it will offer a long trade opportunity, but it's running out of time to do this.

It's interesting to see so many indices test their 200-day MAs from above or below. Current action does feel like a significant moment for markets that will set the tone for the rest of the year. Current events favor bears, but markets have done relatively well to resist the political and economic damage.

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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

"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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Markets Rally But "Bull Traps" Hold For S&P and Bitcoin

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Markets were able to stage a recovery after Tuesday's losses, but the recovery - while newsworthy - didn't do enough to make back all of those losses, and critically, there is still a key "bull trap" in the S&P. Technicals are still mixed for this index, with momentum (stochastics) failing to return to an overbought condition, a condition required to sustain a rally.
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