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Small Caps Get Their Bounce Off Rising Support

By Declan FallonStock MarketsJun 29, 2017 12:10AM ET
Small Caps Get Their Bounce Off Rising Support
By Declan Fallon   |  Jun 29, 2017 12:10AM ET
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The last few months have seen Small Caps trade inside a lengthy sideways pattern but their moment in the shade may be coming to an end. Yesterday's rally in the Russell 2000 was a picture perfect bounce off rising support.

Not only that, the index mounted a strong challenge on the early June 'bull trap'. This improved strength has been represented by the continued uptick in relative performance against the NASDAQ. The next watch area will be a new MACD trigger 'buy' to coincide with a negation of the 'bull trap'. Once it gets out of the range it will open up for a new round of speculative investing.

RUT Daily Chart
RUT Daily Chart

The S&P made back all of Tuesday's losses but it hasn't gone as far as to challenge the 'bull trap'. Volume was lighter, but the 'buy' trigger in On-Balance-Volume remains intact. The MACD trigger 'sell' remains with the ADX experiencing a whipsaw. Watch for a move to challenge the 'bull trap' above which is room to move to channel resistance.

SPX Daily Chart
SPX Daily Chart

The NASDAQ still has the large bearish engulfing pattern to undo, in addition to a recent 'bull trap'. However, yesterday's action was a solid recovery off channel support and the 50-day MA. Technicals are a little mixed with a 'sell' trigger in the MACD and ADX with weakening stochastics offset by a recent 'buy' trigger in On-Balance-Volume.

COMPQ Daily Chart
COMPQ Daily Chart

Today will be about holding existing positions and seeing what evolves. Longs will have the 2-day low (as of from yesterday and Tuesday) to use for stop protection. Shorts will want to see how rallies evolve from here - the Semiconductor Index in particular - before looking to enter new positions.

Small Caps Get Their Bounce Off Rising Support

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Small Caps Get Their Bounce Off Rising Support

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