Small Caps Finally Get The Breakout Move As Large Caps Get Sold
Small Caps Finally Get The Breakout Move As Large Caps Get Sold
Weekly Market Update - July 11, 2024
The Markets
Small caps and IWM finally get the nod.
The consolidation pattern that's been building for months has finally found a resolution. This morning, the latest CPI data was announced lower than expectations. The results initially took all major indexes higher. The most notable move, though, was definitely IWM, which moved quickly to $207.50.
This lined up with the pivot high from June 3 and would've been a reasonable place to rest. But the action didn't stop there. As the morning progressed, the small caps continued higher while the large caps were sold.
Now, we have a huge divergence: IWM is up +3.59% for the day, while QQQ is down -2.19%.
Let's see the action on the charts.
The Charts
SPY made a new high yesterday as it moved into the 1.618 Fibonacci extension level. This was accompanied by a DeMark 9 sell signal and an RSI of more than 80, producing an attractive tactical short trade setup. That setup worked very well as the large-cap index put in a bearish engulfing candle on the day.
QQQ had a very similar setup. It also made a new high yesterday, at the 1.618% Fibonacci extension, with the DeMark 9 sell signal and an RSI of 79.60. The selling produced a bearish engulfing candle, with the difference that it closed beneath the 8-day MA. This is another profitable short trade as the short-term momentum leaves the index.
IWM was the big winner on the day as the small-caps rallied hard on the lighter-than-expected inflation data. The long-forming consolidation pattern finally gave way to an upside resolution, and the index opened at one pivot level and closed near the next, nearly achieving two upside targets in just one session.
The other small and mid-cap indexes (MDY, RSP, and QQEW)that have been a focus here also had positive action. You can view that update here on X.
DIA moved higher but formed a potential reversal pattern with the doji candle (indecision). That is subject to confirmation tomorrow with an open and close below today’s open and close.
TLT is back over the 21-day MA and trying to resume its upward momentum.
DXY was notably lower on the day, finding support at the 200-day MA and the anchored VWAP from the December 2023 low.
BTCUSD continues to struggle with the $58.2k pivot and the 200-day MA despite weakness in the Dollar.
The Trade
Monday's plan has worked out well.
The trade (for the more short-term, tactically oriented) is:
—To trim into strength
—Raise stops along the way
—Remain cautious in starting new longs
—Potentially add some tactical shorts or otherwise hedge long positions
Back with another look on Thursday to see how the events played out.
Now we’ve seen the reactionary move. Keep ready and see how far the large-cap move lower can go. QQQ has already touched its 8-day MA. SPY isn't far behind.
While that is happening, we should take time to refresh the shopping list for new long ideas. Identify names, levels, areas, and potentially attractive buy points. Then, write the contingent trading plans and set alerts to know when the setups trigger.
Don’t forget that we get more inflation data in the morning with PPI.
One step at a time.
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The Disclosures
***This is NOT financial advice. This is NOT a recommendation to buy, sell, or trade any security. The content presented here is intended for educational purposes only.
Andrew Moss is an associated member of T3 Trading Group, LLC (“T3TG”), an SEC-registered broker/dealer and member of FINRA/SIPC. All trades placed by Mr. Moss are done through T3TG.
Statements in this article represent that person’s opinions only and do not necessarily reflect those of T3TG or any other person associated with T3TG.
Mr. Moss may hold an investment position (or may be contemplating holding an investment position) that is inconsistent with the information provided or the opinion being expressed. This may reflect the financial or other circumstances of the individual, or it may reflect some other consideration. Readers of this article should consider this when evaluating the information provided or the opinions being expressed.
All investments are subject to the risk of loss, which you should consider in making any investment decisions. Readers of this article should consult with their financial advisors, attorneys, accountants, or other qualified investors before making any investment decision.
POSITION DISCLOSURE
July 11, 2024, 4:00 PM
Long: n/a
Short: n/a
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Ticker, Date, Call/Put, Strike Price
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