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

Russell 2000 Breakout and AI concerns

The long weekend has been kind to markets. The Russell 2000 finally joined lead indices with a breakout to new highs. The MACD is still on a 'sell' trigger, but other technicals are bullish once more.

The equal-weighted S&P managed to post its breakout before the Memorial weekend, and added a little by today's close. We will want to see how 8.3K support holds on the next test, when - or if - it manages such a test. A retest of 8.3K would be a buying opportunity, but we need to be aware for the potential of a 'bull trap'

Gains in the Russell 2000 are causing a relative strength shift away from the Nasdaq and S&P. The Nasdaq is on a MACD 'sell' trigger alongside that of the S&P.

The Semiconductor Index made yet another breakout, turning already extended technicals into new 'buy' signals. These gaps point to over extension, but it can be hard to jump off for FOMO. I have added a new measured move target as a result of the new gain, but for an entire sector to double in just a few months just isn't a fair evaluation. Like many, I have been making increased use of AI at work, but as a someone experienced in technical writing - where brevity and clarity are key to good writing - the verbosity of AI is a significant cost, and ultimately, a natural resource concern, that AI companies have little incentive to correct in the chase for profits. Studies have also shown models can work against their prompters, obfuscating their workings. Even if models didn't obfuscate their intentions, what they are doing may be hidden in plain sight behind the content deluge returned during processing. AI has given me the ability to solve coding problems I don't have the knowledge to do myself, but a what cost? I would be lying if I understood the hows, or picked through its reasoning as to how it got there. Or indeed, if any vulenerabilities were introduced from its self-generated checks? There will be increased pressure to roll out production level, AI generated code across sensitive sectors like financials, care and manufacturing. But is AI the fox that has been left to look after the chicken house... Go watch "The Game", Star Trek: The Next Generation, and frame it in the context of AI, and those who control it.

Going back to price action, the Bitcoin recovery looks to be stalling out. Today's selling brought it back to breakout support, undercutting the 50-day MA in the process. The next move here is likely to be lower as technicals remain predominantly bearish.

For the tech rally optimists, look to Nasdaq breadth metrics. The last major top in 2021 was driven by bearish divergences across these metrics, following breadth peaks in the early part of the year. Currently, we are not even close to marking such peaks, and it could be 12-18 months before we do - and then, it could be another 6 months from there before we see a decline in the Nasdaq. Who knows where Semiconductors may be then...

There is increasing talk of a major top in markets, but I'm not entirely convinced given the recency of fresh breakouts, particularly for the Russell 2000, but we need to be aware of the possibility for 'bull traps'. Maybe Semiconductors have been mispriced, but not to the extent we are seeing in recent months; expect the hangover to be painful.

---

Follow Me on Twitter


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

Sellers Accelerate Action As Confirmed Distribution Kicks In

Image
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.
Read more

Markets Dont Trust Trump

Image
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.
Read more

Archive

Show more