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Small Cap Weakness Spreads; Market Consolidation Could Continue

By Declan FallonJun 26, 2019 12:17AM ET
www.investing.com/analysis/small-cap-weakness-spreads-200434682
Small Cap Weakness Spreads; Market Consolidation Could Continue
By Declan Fallon   |  Jun 26, 2019 12:17AM ET
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Sellers took a third day of selling out of the Russell 2000 yesterday, and this weakness made its way to the S&P and NASDAQ. The selling is more problematic for the Russell 2000 because there is a genuine lack of conviction from traders wanting to pick up an index which is trading at a deep discount to its peers.

RUT Daily Chart
RUT Daily Chart


While the Russell 2000 is struggling the S&P is knocking on the door of all-time highs. Profit taking at resistance looks the most likely cause of yesterday's action but it will be important there is no acceleration into a deeper loss undercutting moving averages; 20-day and 50-day MAs to begin with.

SPX Daily Chart
SPX Daily Chart


The NASDAQ is just behind the S&P but is close enough to all-time highs to mark yesterday's selling as profit taking too. The index finished on its 50-day MA, so what happens here will act as a guide for the S&P.

COMPQ Daily Chart
COMPQ Daily Chart


The Semiconductor Index is still caught in a bit of a no mans land with the recent consolidation bound by 20-day and 50-day MAs. If this is able to push above the 50-day MA I think it could go on a nice run, but it will need to clear the double-black-candlestick pairing at 1,441 soon enough.

SOX Daily Chart
SOX Daily Chart


The Dow Transports and Industrial Average relationship continues to struggle with new lows in the trend. The lower Transports-to-Utilities ratio is similarly pointing to a bearish outlook for stocks.

TRAN/INDU Daily Chart
TRAN/INDU Daily Chart


Markets are too overbought to consider themselves at risk of a crash, but a continuation of this long standing consolidation does look a more likely outcome. Moving averages will play as a first stop for support, with May lows the last boundary for maintaining the consolidation. For now, stocks are a hold, but there is little to suggest a fresh buying opportunity is available.

Small Cap Weakness Spreads; Market Consolidation Could Continue
 
Small Cap Weakness Spreads; Market Consolidation Could Continue

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Jesper Davidsen
Jesper Davidsen Jun 26, 2019 3:30AM ET
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