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Russell 2000 in an Ascending Triangle Squeeze as S&P 500, Nasdaq Struggle

Published 2024-04-09, 06:09 a/m
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If there is a swing trade with plenty of tension ready to snap, it's in the Russell 2000 (IWM). The index looks poised to either negate the late March 'bull trap', or crack below ascending triangle support with a big, red candlestick.

Technicals still favor bulls, although the earlier MACD trigger 'sell' is a bit of a concern; note, MACD 'sell' triggers that occur above the MACD zero line are at best, weak 'sell' signals - often a good time to sell covered calls rather than offload a position.

On-balance volume continues to trend higher, and momentum, as measured by stochastics, is firmly above the 50 mid-level. If there is a break of the trendline, then look for a move back to $187-189 in a likely continued evolution of a time-based, sideways consolidation.

IWM-Daily Chart

It's a bit of a different story for the Nasdaq as it returns to its breakout price on a move to challenge its 'bull trap'. This index has already broken trendline support and the small doji at resistance points to trader indecision.

I would be looking for further losses with the MACD accelerating downwards. On-Balance-Volume is holding on, although momentum has finally dropped out of its overbought state; another indicator that the prior bullish trend is done.COMPQ-Daily Chart

The S&P 500 is in a similar precarious state as the Nasdaq, having also experienced a MACD trigger 'sell', but now looking at weakness in On-Balance-Volume with a 'sell' trigger too. Momentum is more bullish than for the Nasdaq and Russell 2000, but this has just dropped out of an overbought state.

SPX-Daily Chart

Going forward, I would be looking for the development of sideways (time) consolidations for both the S&P 500 and Nasdaq, and this is likely to have the knock-on effect of delivering a breakdown from the "ascending triangle" in the Russell 2000 ($IWM).

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