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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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Sellers Appear As Options Expiration Clouds Volume

We had some decent selling across markets on higher volume, that would register as distribution on a normal day, but on options expiration the true picture is a little cloudier. While this selling looks to be damaging, follow through is needed if it's to evolve into something bigger.

The Russell 2000 ($IWM) edged back to former handle resistance, turned support, which is also where the 20-day MA can be found. Another day of selling would take it far enough away from this support to leave it looking at the 50-day MA as its probable next step. There was a weak MACD trigger 'sell' as other technicals have held up well despite the index peaking in early May. The relative underperformance against the Nasdaq looks worse than it is, but even if this recovers a little there may be sufficient merit to see buyers come in on money rotation.

With the weekly chart pointing to a possible 'bull trap' and short play? It has been interesting to see the sharp drop in trade volume since the March lows.

In contrast, selling was not as intense in the S&P, and given its prior gain, barely registers as a drop. Technicals remain net bullish.

But the picture for the equal-weighted S&P looks a little different. Friday's selling was not high in percentage loss terms, but the solid red candlestick on the undercut of the 20-day MA looks ugly, and has the potential to be ugly. Monday's trading will be significant.

Not too much to say about the Nasdaq, but Bitcoin is getting squeezed by its 200-day MA and fast approaching 50-day MA. An undercut of the 50-day MA that also reverses the breakout might be a reason to go short. Technicals remain mostly bullish but you can see the bullish momentum (stochastics) fade in strength.

The Dow Industrial Average finished on 20-day MA support, but an open belos this moving average could offer a day-trade-short. Volume climbed to register potential distribution.

Tomorrow looks like a day where we could get another day's worth of selling, but given the strength of the rally off March lows there is probably an appetite for buyers to give indices one more shot of long buying. If you want to play short then you need to be aggressive with your stops to protect the position and any profits generated, because buyers will hit indices hard when they come in.

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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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