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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 Offers Steady Gains On Successful Backtest

Semiconductor stocks are hogging all the limelight with their Y2K sized gains, but there is quiet strength in other indices with the foundation for more.

The Russell 2000 eptimizes this best after breaking from it narrow handle it has managed a successful test of that handle - now support - with a combined test of its 20-day MA, topped off with a 'bullish hammer'. Technicals are net positive, although the MACD is about to trigger a weak 'sell' trigger. If there is a negative, it's that since the breakout, the heavier volume trading days have favored distribution, but the nature of the trend is still positive.

The Russell 2000 has the potential to follow the lead of the S&P, that had a similar 'handle' breakout, and is on course to reach its measured move target following the break of 7K. Here, the heavier volume days have gone with bulls and rank as accumulation days. Although even here, we can see a vast underperformance relative to the Nasdaq.

The Nasdaq has been on the rip since undercutting its 200-day MA. It's currently 14% above its 200-day MA, that puts it in the 15% zone of historic price extremes dating back to 1971. The index last reached the 10% zone in July 2024, which interestingly enough, marks the starting point for the resistance channel in the index; buyer beware. A good time to take profits (although in itself, didn't mark the end of the rally).

Where things get a little more interesting is in the equal-weighted averages. The equal-weighted S&P has been spiking both high and low with the 20-day MA offering support, but the February high proving to be stubborn resistance. If this doesn't break higher soon we will see a squeezed short play as traders get trapped on a flush lower.

Likewise, the equal-weighted Nasdaq 100 has made it to January high resistance and is consolidating a little before an eventual(?) breakout. Technicals are more bullish than for the equal-weighted S&P, but it's lagging a long way behind the Nasdaq itself.

The Dow is also trading below Jan/Feb highs as trading volumes side with bulls, but technicals are mixed. In the broader context of the market, it features little, but what it does matters. If it breaks higher, it will point to broader strength, irrespective as to what comes next for Semiconductors.

My reliable call has been Bitcoin. It's now at its profit target of its 200-day MA. It may go higher, but now would be a good time to take some profits and let the rest ride; how much will depend on your risk tolerance.

Lots to play for this week. I would expect a sharp correction in tech soon, but there is nothing to suggest this would be a crash. Other sectors, aside from defensive consumer stocks, are doing well, so we will see despite the instability in global affairs - the impacts of which have been swept under the rug by the media (food supply later this year - not oil - is the going to be the big one).

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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

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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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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