Dow Ploughs A Lonely Furrow. Small Caps Feel The Strain
Declan Fallon | Aug 04, 2017 12:01AM ET
Markets are feeling the pinch in what was a heavy sell off in the Russell 2000. The break of the rising trendline has accelerated a rout rather than consolidated a 'bear trap'. The index undercut the 50-day MA in a clean move which didn't suggest demand buyers were willing to step up to the plate. Next stop is the 200-day MA.
Next feeling the pressure are the NASDAQ and NASDAQ 100. Both indices are sitting at a support level although the NASDAQ has a 'sell' trigger in the MACD and On-Balance-Volume while the NASDAQ 100 has just a 'sell' trigger in the MACD. Selling volume has been relatively mild since the top reversal. Relative performance has moved away from Tech indices and give lead action in the Russell 2000. The likely outcome here are for breaks of rising support.
The Dow Jones is the only index pushing highs, but given the string of tight gains it's hard to see these hanging on. However, until proven otherwise, bulls hold all the cards.
The S&P was the only quiet index. There may be a potential double top but it's a scrappy one. There are 'sell' triggers in the MACD and On-Balance-Volume but Stochastics are strong.
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For Friday, look for selling pressure in the NASDAQ and NASDAQ 100 to generate support breakdowns. Aggressive traders may look to catch a top in the Dow but there isn't a clear marker to suggest such a top is in place. Bulls will probably have to wait for a wide range reversal in the Russell 2000 – the index suffering the most from sellers.
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