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Small Caps Get Their Bounce

Courtesy of Declan.

The last few months have seen Small Caps trade inside a lengthy sideways pattern but its moment in the shade maybe coming to an end.  Today’s rally in the Russell 2000 was a picture perfect bounce off rising support.  Not only that, it 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.






The S&P made back all of yesterday’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 whipsaw. Watch for a move to challenge the ‘bull trap’, above which is room to move to channel resistance.





The Nasdaq still has the large bearish engulfing pattern to undo in addition to a recent ‘bull trap’.  However, today’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.





Tomorrow will be about holding existing positions and seeing what evolves. Longs will have the 2-day low (as of from today and yesterday) 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.




You’ve now read my opinion, next read Douglas’ blog.




I trade a small account on eToro, and invest using Ameritrade. If you would like to join me on eToro, register through the banner link and search for “fallond”.




If you are new to spread betting, here is a guide on position size based on eToro’s system.






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