I know everyone is thrilled with the move in Microsoft (MSFT) and now Meta (META) and heck maybe Amazon (AMZN) or Apple (AAPL) will deliver similar moves. But focusing on that handful of stocks means I see very little chatter about the Russell 2000. Or the transports.
First let's talk about the Russell, because do you realize that it closed at 1730 on Wednesday? Do you also realize it closed at 1722 on Dec. 28? And on March 22, it closed at 1720? That means this is the third time it is back in that area.
If we use the Russell fund (IWM) to represent it the support line, it is pretty clean. And with the Russell down 3% this week I figured it was worth another look.
Typically when the Russell has fallen this much I look to see if it is short term oversold. After all, the Nasdaq has had seven straight days of negative breadth, so there is some level of oversoldness (short term) emanating from the small caps using that metric.
Long-time readers know that when we have seen the market down this much I like to take a look at what it will take to get the Nasdaq or Russell Momentum Indicator to turn up even if the index closes lower.
Considering what my Oscillator looks like, I figured for sure if I walked the Russell down another one hundred points surely the Momentum Indicator would turn up. Recall I performed this exercise several times in mid March and it turned up that third week of March, no matter how much I walked the Russell down. That is the definition of oversold.
Take a look now: I can't even get an uptick in the Momentum Indicator if I keep plugging in lower closes. That is unusual and tells me that whatever oversold bounce we get could be short lived, or maybe a bounce does not spill over to small caps, but that's hard to believe.
I really do think the Russell should bounce off those prior lows on the first trip down here (call it $170 on the IWM) but I am shocked this Momentum Indicator keeps going lower. I suppose that goes hand in hand with the number of new lows rising. Yesterday we looked at the raw data of new lows (it's expanding) so today let's check in on the ten day moving average. You can see it has ticked up, with over 400 stocks making new lows on Nasdaq Wednesday.
I also find it curious that the Transports are essentially at the same place on the chart that the small caps are. There is some support from this blue line but I think the Transports look like they should fail around 14,000 if they manage an oversold rally.
I suspect the American Association of Individual Investor day traders will have scurried back to the bear camp when the survey results are released Thursday morning but the more slow moving Investors Intelligence bulls are still at the same place they have been for four weeks. That is the complacency I keep referring to.