Bottom Line:
The Russell 2000 is the broadest of the four primary US trading indices, so it is always critical to watch. During the manic ramp by the NDX, and to a slightly lesser extent the DOW and SPX, into the July highs, The Russell 2000 lagged in performance. It finally managed to break above a critical KRA near 1905-1915 in early July, but it was unable to validate the bull trend in the other indices by closing above the 2030 level.
Now it has declined to a clear and important downside KRA at 1828-1817. The RUT had traded virtually straight down since the July top, so it is due for a bounce and Friday’s reversal day wasn’t particularly surprising. Maybe it’s a coincidence that it stopped just above this critical downside level, but regardless that level remains important. Some sort of Balance/consolidation with Friday’s low being at least very close to a downside extreme would be typical, if “typical” can be trusted in these markets.
PDF: Weekend Report_2023_08_20
VIDEO
RUT Daily
Upper KRAs: 1915-1905
Lower KRA: 1828-1817
NDX Daily
Upper KRAs: 16206
Lower KRA: 14338-14213
SPX Daily
Upper KRA: 4493-4471
Lower KRA: 4327; 4278-4257
Auction Market Structure – SPX
Regardless of which path plays out, last week’s trade is increasingly due for some retracement/Balance.
DOW Daily
Upper KRA: 35000
Lower KRAs: 33901-33621
Internals
NYSE internal data is not always helpful. It may be now. The 10-day MA of NYSE advancing issues is at a level from where at least short-term but sharp rallies have occurred since the January 2022 top.
BUT….what has not yet occurred is a -2000 closing NYSE breadth reading, which was another coincident event at those previous lows. Closing breadth came close on 8/15, closing that day at -1963, but still not -2000 or lower. Also, the 5-day MA is not quite at the extreme seen in those other instances.
Monday’s trade will no doubt be affected by Friday’s large option expiration, so the reshuffling that will continue to occur on Monday has the potential to dramatically expand, or contract, market breadth.
Please see additional comments in the video.
10-yr Notes
Both US 10-yr Notes and 30-yr Bonds are at hugely critical levels.
Notes need to close above 112’00 to restore any bullish outlook.
US Dollar
Another “prisoner” of Jackson Hole. Structure off the low is suggestive of a sharp move, but the direction is a coin flip.
Gold
Gold is in a textbook two-sided directional grind that always results in a sharp move. 1890-1882 should hold under a longer term bullish assumption.
Crude
Between important levels.
