Russell 2000 Feels The Heat
NDX
-0.51%
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US2000
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The Russell 2000 has been bucking the trend by enjoying a relative strength advantage over peer indices, but yesterday was the first sign that there may be a shift away from growth stocks to more defensive large cap stocks in the near term — not the best timing given the proximity of support. Yesterday’s action generated a new ‘sell’ trigger in On-Balance-Volume and effectively confirmed a ‘bull trap’ of Tuesday’s breakout.
IWM Daily Chart
The Russell 2000 loss is the S&P‘s gain as the latter index enjoyed a relative performance gain despite recording a loss yesterday. Having said that, the S&P is in a bit of a no-mans land and even a couple more days of selling is unlikely to change that. I have marked the required breakout levels to watch for on the chart below.
SPX Daily Chart
The Nasdaq is also holding support but is closer to channel resistance than the S&P. The MACD is still on a ‘buy’ trigger, although other technicals remain firmly bearish. The index is underperforming relative to the S&P, although I suspect this will be the index which will benefit most from the rotation away from the Russell 2000 and Nasdaq.
COMPQ Daily Chart
For today, we have the all important end-of-week candle to consider along with the standard day-to-day trading. Bulls need to keep a close eye on the Russell 2000 as yesterday’s action has set up the index for further losses today. If there was a preference, it would be for ‘dragonfly’ doji or bullish ‘hammers’ — with a solid, long tail spike to mark the bullish reversal of fortunes.
