The Russell 2000, the index that most closely represents the small cap stocks I trade has fallen below the 50 day MA.
Now is the time to watch this index like a hawk. If you trade the same small cap stocks that I do then you know how crucial this index is. As stocks follow their index at a rate of 4:1, you want to be very careful when negative price action shows up.
Let’s take a look at the charts:
Here you can see the trendline break on the hourly — bad for short term traders.
Failed breakout at the beginning of July. This chart is from yesterday, but the index has now crossed fully below the 50 day MA — and that means CAUTION AHEAD if not a full on pause in trading activity for me.
This could be a double top forming. For now I’m trading a couple Gold stocks, because I like the price action, but other than that I am out of the market. Of course, the real test is that 50 week MA. If that holds, all is good. If that gives way then a much deeper correction could be on the way.
Good luck out there!