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Dow Poised to Break Out as Russell 2000, S&P 500 and Nasdaq Gain Ground

Published 2023-01-16, 03:00 a/m
Updated 2023-07-09, 06:31 a/m

Markets edged towards a breakout in another day of buying. Buying volume was down on Thursday, but indexes are only a day or two away from significant breakouts.

The Russell 2000 (IWM) made strong gains in relative performance since the middle of December and ticked nicely higher on Friday. The target breakout price is $188.70, although we should expect some pause at this price as the rally has gone six days without any giveback. 

IWM Daily Chart

The Dow Jones looked ready to break out on Friday, but it didn't quite get there. Technicals are net positive - although the index continues to underperform the Technology. Monday would be a good time to see it happen.INDU Daily Chart

It's still a bit of a slow burn for the Nasdaq 100 and S&P 500. The Nasdaq has managed to get itself above its 50-day MA but remains far from challenging its 200-day MA. Technicals are net positive, and the index is outperforming large-cap indexes.COMPQ Daily Chart

The S&P will need a few more days (or weeks) before it can challenge December highs, but it did manage to close above its 200-day MA.

The sharp underperformance against the Russell 2000 is the concern - at least for this index (not so for the Russell 2000). I would rate this as the accumulator index, with traders focusing on the Dow or Russell.SPX Daily Chart

Breakout traders will keep the focus on the Dow Jones Industrial Average, but the real winner could be the Russell 2000 (IWM).

I would be happier to see gains in the Russell 2000 as it would mark a return to more speculative investing. Overall, technicals are much improved, leaving bears with much to do if they are to break this. 

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