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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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Media Talks Of "Slides" But Breakouts Not Done Yet

One (semi-)bad day in markets does not make for a bear market. Today didn't deliver for markets the baby-step gains of recent days, but instead offered a large step down.

The Russell 2000 ($IWM) edged a breakout last week, but today's loss took it back to breakout support. Another down day tomorrow will mean a 'bull trap' and a likely move down to (and below) $287, and would probably be a short play. Longer term, the 200-day MA would come into play.

The S&P is caught in a bit of a no-mans land between a narrow handle and breakout support. There is the potential for a 'bull trap', but it's all quite subtle. We have a new 'sell' signal in On-Balance-Volume to go with increased distribution over the last couple of days. An undercut of 7.600 would effectively confirm the 'bull trap', and open for a short play down to 7,300.

The equal-weighted S&P had already banked more gains than the weighted S&P, so today's loss is not so damaging, but it does market a potential shift in the rate of advance for the rally; test of a 20-day MA looks a minimum, test of 50-day MA preferable.

I'm less concerned with the Nasdaq because it has remained range bound throughout the July-August rally. There is a 'sell' signal in On-Balance-Volume, and a pending one in +DI/-DI, but it's not there yet. As a range bound index, it will take a solid push below $25K to confirm a bearish break. For now, it's a weak shorting opportunity.

Bitcoin had drifted back to converged 20-day and 50-day MAs before it staged a one-day gain yesterday. The larger summer range is the dominant influence, but it won't have to wait long for the 200-day MA to make its presence felt. I still think this is long term 'buy', but the near term picutre remains scrappy.

We will have to consider the potential for longer term pull backs if selling continues tomorrow, but for now, there is enough nearby support to continue last week's breakouts. Shorts can be aggressive, but if today's gap breakdowns close, then all short bets are off.

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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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S&P Prepares For Breakout

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A good start to the week has left indices nicely positioned to kick on with volume rising in accumulation. Best of this is probably the S&P. Today' buying left it on the cusp of a breakout, although it wasn't enough to reverse the 'sell' triggers in On-Balance-Volume and +DI/-DI. However, a breakout would likely turn these technicals net bullish once again.
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