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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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S&P Joins Nasdaq With Net Bearish Technicals

It's not all doom-and-gloom, but there is a split between the Russell 2000 ($IWM) and equal-weighted S&P ($SPXEW) and the Nasdaq ($COMPQ) and weighted S&P ($SPX). It's still unclear which side will win out, but we can play each trade as it stands.

The S&P dropped below its 50-day MA on higher volume distribution, enough so that it's now considered to be net bearish. The index is outperforming the Nasdaq, but unless there is a quick recovery this index will drift back to 7K; shorts can place a stop above its 50-day MA.

The Nasdaq had already undercut its 50-day MA, and lost further ground on Friday on higher volume distribution; a sign of what's to come for the S&P. Technicals are net negative, but are not oversold, so this remains on course to make it to 24K.

The Russell 2000 ($IWM) sits on the other side of the coin. The index managed to rally from $296 before closing just shy of $300. Compared to the aforementioned indices, it's net bullish. I would expect gains to continue; longs can place a stop below Friday's lows.

The equal-weighted S&P closed with a bullish white candlestick, completing a sequence of "three white soldiers", which is a continuation bullish pattern. Technicals are mixed, but price action is key and this is on course to make new highs (Friday's high counts as a new all-time closing high).

Bitcoin is siding with bears. Last week offered the potential for a tweezer bottom, but Friday's small loss eased back into the tweezer spike lows. Technicals are net negative, including a new bearish 'sell' trigger in the MACD.

The Dow Industrials is drifting sideways with spike highs taking up most of the action for the last couple of weeks. Technicals are net bullish, although the MACD is shifting sideways as On-Balance-Volume trends sharply higher - although Friday's bearish distribution bucks this trend.

The other problematic index is the Semiconductor Index. It has played to a bull trap and undercut its 20-day MA in the process. Technicals are mixed, but given the doubling of the index since March it could shed a tonne and not shift bearish.

There are trades for both sides tomorrow. Waiting after the first half-hour to see the direction of the market will determine if you should be playing the long- or short-side of the market.

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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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