Don't Ignore This Chart!

Small Caps Hang Onto Key Price Support

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The Russell 2000 has been under selling pressure but is now testing key support on both its daily and weekly charts.  There is a slight negative divergence that's present on its weekly chart, so that would be a signal of possible weakness ahead.  The good news is that none of the other major indices have similar momentum issues on their longer-term weekly charts.  Still, let's focus on the small caps and take a look at the support that's holding on the daily chart:


Thursday's rally occurred just in time here on the daily chart as support beneath 1350 held nicely.  But the bigger issue could be slowing momentum on the weekly chart with 20 week EMA support being tested.  Check this out:

A close beneath the rising 20 week EMA would then begin to signal a much stronger likelihood of an extended move to the downside.  I do find it helpful, however, that the other major indices show very strong momentum on their respective weekly charts.

Happy trading!

Tom

Tom Bowley
About the author: is the Chief Market Strategist at EarningsBeats.com, where he provides stock market education, guidance, and trading strategies using a unique combination of technical, fundamental, and historical analysis. Tom provides EarningsBeats.com members with four portfolios (Model, Aggressive, Income, and Value), all designed to beat the benchmark S&P 500, and a revolving Watch List of hundreds of companies reporting strong quarterly earnings (must beat both revenue and EPS estimates) and exhibiting technical strength as well. These companies comprise EarningsBeats' annotated Strong Earnings ChartList (SECL), from which Tom trades exclusively. Tom writes a Daily Market Report (DMR) for members to include an executive summary, market outlook, sector/industry watch, and trading ideas. Learn More
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