AI
Sunday, May 02, 2010 12:01:39 PM
NASDAQ AND RUSSELL 2000 CONFIRM BEARISH SIGNS
By Tom Bowley
In my last article I suggested the financials were topping and that would make any further advance in the market difficult. Well this past week the action on the NASDAQ and Russell 2000, home of the high beta stocks, confirmed the bearish action. We've seen several warning signs develop over the last several weeks. These include extremely overbought conditions on both daily and weekly timeframes, negative divergences on the MACD on daily and weekly timeframes, outrageous relative complacency unlike anything we've seen since the CBOE began providing us equity only option data in 2003, and significant price resistance levels.
First, let's take a glance at the Russell 2000:
The 650-750 area appears to be the trading range for the Russell 2000 now. After weeks of steady movement higher, the bearish dark cloud cover candle from last week suggests the near-term is likely to be a bit more dicey. The 20 week EMA is at 662 and rising and that too has proven to be a solid support level over the past year. The Russell 2000 is being featured as our Chart of the Day for Monday, May 3, 2010 and can be viewed by CLICKING HERE.
The NASDAQ is a bit more bearish considering that it still has a long-term negative divergence present on its weekly chart. That has the potential of leading to a 50 week SMA test to "reset" this oscillator. Take a look:
http://blogs.stockcharts.com/chartwatchers/
By Tom Bowley
In my last article I suggested the financials were topping and that would make any further advance in the market difficult. Well this past week the action on the NASDAQ and Russell 2000, home of the high beta stocks, confirmed the bearish action. We've seen several warning signs develop over the last several weeks. These include extremely overbought conditions on both daily and weekly timeframes, negative divergences on the MACD on daily and weekly timeframes, outrageous relative complacency unlike anything we've seen since the CBOE began providing us equity only option data in 2003, and significant price resistance levels.
First, let's take a glance at the Russell 2000:
The 650-750 area appears to be the trading range for the Russell 2000 now. After weeks of steady movement higher, the bearish dark cloud cover candle from last week suggests the near-term is likely to be a bit more dicey. The 20 week EMA is at 662 and rising and that too has proven to be a solid support level over the past year. The Russell 2000 is being featured as our Chart of the Day for Monday, May 3, 2010 and can be viewed by CLICKING HERE.
The NASDAQ is a bit more bearish considering that it still has a long-term negative divergence present on its weekly chart. That has the potential of leading to a 50 week SMA test to "reset" this oscillator. Take a look:
http://blogs.stockcharts.com/chartwatchers/
Join the InvestorsHub Community
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
