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Russell 2000 Acting as a Lead Index

During early afternoon trading it was looking like the Russell 2000 was going to break support and leave a ‘bull trap’.

 

By Dr. Declan Fallon

 

While the ‘bull trap’ remains in play the loss of support hasn’t been confirmed which would show a reversal. However, this is acting as a lead index and will determine what may come for the Nasdaq (NYSEARCA:QQQ) and S&P(NYSEARCA:SPY).


The Nasdaq tagged breakout support in what was a text book example of a breakout retest. This doesn’t mean such support will hold, but it’s a healthy play for those looking for higher prices.

The S&P is range bound and enjoyed a recovery today, but not enough to drive a break of resistance. ¬†Given action in the Russell 2000 it’s unlikely to make that move higher, but if the Russell 2000(NYSEARCA:IWM) can hold support it may be able to lead higher.

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For tomorrow, keep an eye on the Russell 2000. Small Caps are an important lead index, and what happens here will have relevance for other indices. There isn’t much direction from Tech and Large Cap indices, so it’s up to Small Caps to make the move.