Friday’s action left a bitter taste in the mouth as the nascent breakouts from the pennants reversed into nasty ‘bull traps’. Worst of the action was focused on the Russell 2000 which undercut the June swing low in the process. Action for this index is looking particularly troublesome as the long standing relative underperformance to peer indices continued its downward trajectory.
The S&P suffered its own significant setback but losses didn’t undercut the prior consolidation pennant. Technicals did return net bearish, not helped by the MACD reversing below the median zero line. A test of the June swing low is next if this is to follow action of the Russell 2000. However, of the Russell 2000-Nasdaq-S&P axis it’s the strongest.
The Nasdaq is caught in the middle of the relative performance shuffle. Like the S&P it finished Friday at support of its pennant. A test of the 200-day MA looks to be next.
The Semiconductor Index also gave up its pennant breakout, undercutting the 50-day MA in the process.
Friday was a bad day to be a bull. The Russell 2000 is particularly vulnerable to further losses as it threatens to be the primary driver of weakness.
You’ve now read my opinion, next read Douglas’ blog.
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SOURCE: Fallon Financial Commentary – Read entire story here.