Don't Ignore This Chart!

Small Caps Hang Onto Key Price Support

Tom Bowley

Tom Bowley

Chief Market Strategist, EarningsBeats.com

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 of EarningsBeats.com, a company providing a research and educational platform for both investment professionals and individual investors. Tom writes a comprehensive Daily Market Report (DMR), providing guidance to EB.com members every day that the stock market is open. Tom has contributed technical expertise here at StockCharts.com since 2006 and has a fundamental background in public accounting as well, blending a unique skill set to approach the U.S. stock market. Learn More