Markets respect resistance as gains stall

Up to now, the Russell 2000 ($IWM) had been doing most of the running, marked by the relative performance gains of this index against the S&P and Nasdaq, but today was the first stall in this rally. Technicals for the Russell 2000 are net positive and remain so despite today's loss. The index is well set up for a breakout next week - I wouldn't be too concerned with today's action.

Russell 2000 ($IWM) makes small gains as part of three month base

While the Russell 2000 ($IWM) is not the leading index in the market it performed the best today, and is builidng a nice base after it's initial failure to break to new highs in early February. The Nasdaq and S&P didn't do a whole lot today, but breakouts from February are intact for both of these indices. Technicals for the Russell 2000 ($IWM) returned net bullish with on-balance-volume on a new 'buy' signal. That said, the index is underperforming relative to both the Nasdaq and S&P. While today finished higher, the trading range neutralises the significance of the gain, and only when the range high or low is breached will we have a return to the November-January rally or a shift towards a more bearish stance.

Markets back inside prior consolidations

After the long weekend markets continued to sell off, bringing the S&P and Nasdaq back to breakout support while the Russell 2000 ($IWM) shaped a potential double top. The Russell 2000 ($IWM) has an On-Balance-Volume 'sell' trigger while other technicals are net bullish. However, the reversal off $205 marks a potential double top, one that would be confirmed on a loss of $190.

Breakdown gaps close for S&P an Nasdaq

When the week started with breakdown gaps for the Nasdaq and S&P, it continued with moves to close said gaps, before peaking on Friday and reversing. Consequently, the likelihood of further losses heading into next week is quite high. If we see losses, then 50-day MAs are the likely test. Since 2024, both the S&P and Nasdaq have be holding 20-day MA support, but a fourth test of the latter moving average would likely be a step too far (for the moving average to hold as support). Adding to the selling pressure are MACD 'sell' triggers. And as a final point, the Nasdaq is underperforming relative to the S&P, suggesting that if there is an index to crack first, it will be the Nasdaq.

Russell 2000 ($IWM) fails its breakout, dropping back into the prior consolidation

I wouldn't classify it as a "bull trap" as Monday's breakout in the Russell 2000 was an internal base breakout, but the drop back into this base places greater significance on support around $190. Technicals are net bullish, but On-Balance-Volume is flipping around its 20-day MA trigger line and ADX is also a little topsy turvy. The MACD might prove to be the bellwether here, and for now, there is a 'buy' trigger above the bullish zero line. The Nasdaq is recovering from its gap down, although there wasn't too much technical damage from this gap. Symmetry could be important here, and what happened in December could repeat here. If this proves true, the next breakout won't come until March. Technicals support this thesis. For the S&P, read the Nasdaq. Same setup, same potential outcome. The semicondcutor index has been performing relatively methodically, moving in step sequence through its bases. There are bearish diveregences

Russell 2000 ($IWM) Breakout

Friday left the Russell 2000 ($IWM) primed for a breakout and Monday delivered on that setup. By the close of business, the Russell 2000 was left with a bullish " three white soldiers " setup and the potential for more upside. So while the Nasdaq and S&P are near market "extreme" tops, the Russell 2000 is still trading well within itself. Technicals for the Russell 2000 ($IWM) are net bullish and improving, but Monday's volume didn't register as accumulation.

Russell 2000 ($IWM) ready to shape right-hand-side of base

Another solid day on Friday for indices with the Russell 2000 ($IWM) building up some nice momentum, but other indices did not disappoint. The Russell 2000 ($IWM) added over 1% as it reached resistance of the January swing high. Volume climbed to register a second day of accumulation in a row, increasing the probability of a breakout. Technicals returned net bullish with new 'buy' triggers in the MACD and On-Balance-Volume. This technical improvement coincided with a bounce from the intermediate stochastic midline, a typical bounce point in a cyclical bull market. While Monday may not deliver another gain, I would be looking for an end-of-day close near resistance.


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