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Technical Update - Nasdaq 100 ticking higher. S&P 500 range bound. Down trending Russell 2000 with spread to big cap Indices increasing
Kim Cramer Larsson
Technical Analyst, Saxo Bank
Summary: Nasdaq 100 uptrend ticking higher despite weakening strength, lifted by Big Techs
S&P 500 almost flatlined and needs break out from range for direction
Russell 2000 could be testing 1,700 key support. Spread versus S&P 500 and Nasdaq 100 increasing
It is primarily the Big Cap companies such as Apple, Meta, Amazon and Microsoft keeping the market afloat pushing the Nasdaq 100 higher.
Nasdaq 100 is slowly crawling higher towards strong resistance at around 13,700. Whether the Index will actually reach that level is debatable.
RSI is positive but with divergence, the Strength Indicator is not supporting the higher Index levels, but the trend is your friend (unless it is about to end)
First sign of the uptrend is about to end would be a bearish break of the lower rising trendline. If combined with RSI closing below its rising trendline the signal would be even stronger.
To confirm the short-term uptrend has reversed a close below 12,938 is needed.
S&P 500 is almost flatlined lately. Range the Index needs to break out of for direction is still 4,195 and 4,050.
A close above 4,195 would cancel the Gravestone Doji Top and Reversal pattern and pave the way to 4,300. Close below 4,050 there is support at 4K and 3,910
RSI is moving below its falling trend line. A close above would be an indication of the upper Index range to be tested.
Russell 2000 small cap Index is the weakest of the main US Indices. Rejected at the upper falling trendline Russell could be set for a re-test of support at around 1,700. A close below is likely to push the Index to 1,650.
RSI is still showing negative sentiment and a close below 40 threshold will further add to the bearish picture for Russell.
RSI is still showing negative sentiment and a close below 40 threshold will further add to the bearish picture for Russell.
Spread Russell 2000 vs Nasdaq and S&P 500 expanding
From the below chart we can see how the Spread between S&P 500 and Russel 2000 and the spread between Nasdaq 100 and Russel 2000 has been developing
From 2021 to 2022 the Spread was expanding between Russell 2000 vs. the two other indices with Russell outperforming the other two Indices.
After the Markets peaked in Q4 2021 Nasdaq 100 has outperformed.
The spread between Russell 2000 and S&P 500 and Nasdaq 100 decreased until Q4 2022, were Russell started struggling to keep up with the bounce in S&P 500 and especially Nasdaq This is resulting in the spreads again to expand.
Money is flowing out of small and mid-caps. One of the reasons is of course that the struggling banking sector has more weight in Russell 2000 Index than in S&P 500 and Nasdaq 100.
However, as mentioned in previous Technical updates Russell 2000 outlook is bleak. Similarities to 2007-2008 is described here: Russell 2000 drawing 2007 pattern
Author is holding a short position in Russell 2000
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