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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 ($IWM) is looking like the first to signal a long term shift in favor of bears with an upcoming "Death Cross" between the 50-day MA and 200-day MA - perhaps completing before the end of the week. Technicals are net bearish and the volume trend has collapsed since the st...
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Russell 2000 ($IWM) Breakdown or "Bear Trap"?

There is an interesting setup coming for the Russell 2000 ($IWM) Today's action saw a move back into last week's breakout gap that registered as a breakdown from its narrow handle, BUT, retained the characteristics of the breakout by remaining above $270. In addition, we have a fast approaching 20-day MA that could provide a cue for buyers to step in. Technicals remain net bullish, although today's volume registered as distribution. While I tend to be a 'glass-half-full' person, I am leaning here towards a possible 'bear trap' that should resolve tomorrow; if we see buyers step in after the first half-hour of trading (when the likely direction for the market that day is established), then it might be worth a long play.

The asset I have been most bullish on in recent weeks, Bitcoin ($BTCUSD), has returned to a support level. I wouldn't want it to push lower from here - and the MACD 'sell' is a little worrisome - but if sellers do continue to act, then look for buyers to come in at its 50-day MA. I still prefer the 200-day MA as the upside target, or at least a price point where significant selling can be expected.

The equal-weighted S&P is running along the lower support level of a small bull 'flag'. Aggressive players could look to go long at its 20-day MA, as it's due an up day soon. An upside break from the 'bull flag' will open for a challenge of 8,300 resistance, and potentially more.

The weighted S&P did very little, but given the small handle its shaping, things are looking nicely (if low key) bullish.

The Dow Industrial Average is also drifting lower and is on course to test its 20-day MA. It has yet to challenge 50K after its initial tag in February, as the index fails to generate the same level of interest as the S&P and Nasdaq, and this is a little disappointing.

The other index to watch is the Semiconductor Index. We got a ping at the second measured move target before prices were rebuffed. It's strongly bullish, but it needs more of a pullback than what we have seen so far.

For tomorrow, focus on the Russell 2000, a "bear trap" looks the favored option, but if things start bad and stay bad, then it's easy to step away.

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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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