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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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Markets Drifting Lower

Sellers took Friday's laurels with sizable enough gap downs for the S&P and Nasdaq. I consider both of these markets to be range bound, so the gaps are not as bearish as they might otherwise be had they occurred from a break of trend.

The Nasdaq is under the most pressure as Friday's gap down has taken the index closest to support defined by the June swing lows. Even if this support is lost, there will be another level to aim for down at the 200-day MA currently at 23,877. Technicals are net bearish, with momentum not oversold. This means further selling can be exspected, but we don't have any crash conditions despite the bearishness of other indicators. One to watch.

The S&P finished Friday just under its 50-day MA and while it experienced the gap down, it's not as bearish as the Nasdaq. Technicals are also more mixed. The June swing low is the target, but if it can stage an early recovery this week then this gap down will become an afterthought.

The equal-weighted S&P is trading at trendline support in a to-and-fro battle at support. A short trade would likely require the undercut of 8,570. Longs need an end-of-day close above 8,700, but this might be hard given action in the weighted S&P.

The Russell 2000 ($IWM) booked its own loss, but not enough to challenge the 50-day MA. This is the index best positioned to book a gain, and maybe manage a new closing all-time high over the coming week or two. Technicals are mostly bearish, although momentum has only dropped out of an overbought state, marking favorable bullish conditions.

Bitcoin still looks to favor bulls, although it hasn't been a clean rally off the 57,500 test. Technicals are net bullish and its trading above its 50-day MA. It's probably the best near and long term trade at the moment.

One thing that's shifting into a more bearish alignment are Nasdaq breadth metrics. The Percentage of Stocks above 50-day MA, 200-day MA and Bullish Percents are net bearish. These are fairly reliable reversal markers, so an extended period of selling (and take profits/short trade)is likely coming.

It's hard to read too much into summer trading. Trump's action in Iran will cloud the picture, but it has become background noise to the big picture. Bears may be able to push things lower, but I can't see the Spring swing lows getting challenged and 200-day MAs are looking the most likely downside targets.

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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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