On the rebound from the October lows, it was the 21-day SMA's that were the first moving average that bulls wanted to see broken. Day's later and a break higher, it was the 50-day SMA's that were challenged and broken to the upside. In recent session's it's been the 21-day SMA's that bulls looked for support, and now broken, has the 50-day SMA's being the "last line of defense" for traders monitoring against what many technicians consider the "intermediate-term" time horizon.
While we've seen some intra-day violations of the 50-day SMA's in the major market averages, the Dow, S&P 500, S&P 100, NASDAQ-100, NASDAQ Composite and the "stronger" Russell-2000 Index (RUT.X) hold above there 50-day SMA's. It's VERY notable that the smaller-cap Russell 2000 Index (RUT.X) 390 -1.24% is just breaking below its 21-day SMA.
Under current market conditions developing and past bullish profile of the Russell-2000 Index from one of my Index Trader Wraps back in October, I'd look to move to the sidelines in a bullish Russell 2000 index trade. The thought for past bullish profile was that it was a stronger longer-term index and was lagging a short-covering rally at the time of profile, but a "safer" and better risk/reward trade for equity bulls on the broader market rally then at hand. Now, with the Dow, SPX, OEX and NDX showing greater percentage declines and some bullish % reversals taking place, a cautious equity bull should look to save some gains in an index trade and sit things out.
I'm also going to suggest that any traders holding partial positions in a recent small-cap bullish profile of Impax Laboratories (NASDAQ:IPXL) $4.03 -1.7% also look to move to the sidelines in this thinly traded generic drug manufacturer. Today's trade at $4.00 was the profiled stopping point from $5.25 profile. Considering the stock is thinly traded, it could be susceptible to some negative price action should market internals and technicals continue to erode.
While recent sessions have seen light volume, today's market volume is also light with the NYSE and NASDAQ just now breaching the 1 billion share mark.
Sector action remains negative with the bulk of equity sectors showing losses. We've seen some afternoon lows and new intra-day lows develop in the Software (GSO.X) 102.54 -3.97%, Internet (INX.X) 95.47 -4.05% and Semiconductor (SOX.X) sectors and hints bulls aren't willing to step up quite yet. This action has the NASDAQ-100 Index (NDX.X) 1,008 -3.04 extending losses and looking to test the psychological 1,000 level of support.
Sectors gains are limited, but the Gold/Silver Index (XAU.X) 77.18 +2.37% builds to a session high and looks to challenge the Natural Gas Index (NDX.X) 146.91 +2.83% for top spot for today's sector winners.
Action ahead of the weekend looks to have bears in the gas/gold sectors weight the possibility of a gap higher on Monday, while the extending of losses in technology sectors has bulls assessing gap lower potential.
One sector that looks to throw a wrench into the scenario that current market action is "geopolitical" related is the lackluster and bearish performance being seen the both defense sector indexes today. I would have thought these sectors would have found some buyers on thought of potential war. As such, still in play is some type of economic scenario of "stagflation" with the action we've been seeing in the U.S. Dollar and Gold.