Stock Trading

Danger — Market Below 50 Day MA

The Russell 2000, the index that most closely represents the small cap stocks I trade has fallen below the 50 day MA.  

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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:

HOURLY:

IWM 60 min

Here you can see the trendline break on the hourly — bad for short term traders.

DAILY

iwm daily

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.

WEEKLY

iwm weekly

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!

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