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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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Indices Test All-Time High Resistance

It's no coincidence to see indices start to slow their gains as resistance approaches. This was best represented by the Russell 2000 ($IWM) as the advanced got squeezed and the net gain on the day was minimal (Futures suggest a modest start, no big breakout yet). The breakout could happen before the week is out, but the gap moves we have seen will act as a draw to be filled, so don't be surprised if we a move back to Tuesday's gap higher. Technicals for the index are in good shape, although volume is a little disappointing.

The glass-half-full folks can point to the S&P that has delivered a breakout on yesterday's close. There is a vulnerability in that it has shot up without decline since recovering 6,550, and it's hard to see that hold without some form of pullback. Again, excellent technical strength, and volume trading has been solid, if unremarkable.

The Nasdaq has the smallest of edge breakouts (16 points above 24K), but it had the benefit of increasing accumulation volume. This is an amazing recovery given it was close to testing 20K only a couple of weeks ago. It has all the green checks; net bullish technicals and lead relative performance for the indices.

The majority of this strength is coming off the back of Semiconductors, which haven't paused since breaking to new highs.

However, much as I dislike the asset class, the long 'tech' trade of choice still looks to be Bitcoin. Plenty of lost ground to make up, and building steady accumulation since the Februart washout.

The disappointments come from the equal-weighted averages and the Dow Industrials. I don't know if this really reflects the true state of the markets, as it's hard to be so optimistic given the unchanged state of the Iranian Gulf War. Yesterday's indecisive spinning top in the Dow Industrials is reason for caution, and it's a 50:50 call as to whether it continues to go test resistance, or makes the equal distance journey back to support and a new undercut of its 200-day MA. Buyer Beware.

The gains of the past couple of weeks don't feel 'real', but price is king and until we see a rejection of resistance (or a failed test of breakout support for Semiconductors), we have to assume the market wants to go higher. It does appear to be a good time to take some profits, particularly from tech stocks, and rotate into some of the underperforming names (nearly any non-tech sector) to take advantage of the next leadership surge.

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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

Markets Dont Trust Trump

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It was an interesting finish to Friday; some indices successfully tested their 20-day MAs - others did not. Pure technical traders could have taken a pop on Friday in the Russell 2000 ($IWM), and equal-weighted S&P ($SPXEW) at their 200-day MAs, knowing that other lead indices were undercutting their 200-day MAs, but it would be a big ask in the age of Trump (unless you were insider trading). Well, markets reacted positively to the announcement that Trump wasn't going to bomb Iran's energy infrastructure, but over the course of the day the majority of market participants didn't believe him, and sellers returned in force. The Russell 2000 ($IWM) managed a picture perfect tag of the 200-day MA on Friday, but on Monday, the higher volume accumulation racked up by the close of business came with a sizable inverse spike.
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Sellers Accelerate Action As Confirmed Distribution Kicks In

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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.
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