The Equal-Weighted S&P Is Left to Make the Running

The Equal-Weighted S&P ($SPXEW) lost ground on Tuesday, but it’s the last main attraction for bulls. The trend from September’s lows has defied two shorting opportunities previously marked at declining trend resistance and the 50-day MA. The 20-day MA may offer itself as support if selling were to continue beyond on Tuesday, but this is at least a workable bounce zone. Technicals are net bullish, but the bounce off September lows has been running in a narrow range and looks prone to a widening, not necessarily a reversal.

The S&P 500 may be a shorting opportunity. We have a potential bullish harami (a reversal candlestick) but it’s down at the last vestiges of support (also good), with a tempting gap down to its 200-day MA. If you wanted to play the bullish card, set GTC buy orders below 7,500 to catch the inevitable stop washout. If you are a bear, try to get an entry as close to 7,600 with a stop just above and play for a move to the 200-day MA.

The Russell 2000 (IWM) is in a bit of a no-man’s-land. It’s caught in a squeeze between 50-day and 200-day MAs. Tuesday’s candlestick is bearish (it would have been a very bullish harami cross had it been a swing low on oversold stochastics, but that is not the case here), and given the vicinity of the 200-day MA and the recency of the last test, I’m expecting a break lower.

The Nasdaq has already blinked with its move down towards the 200-day MA. It hasn’t tested it yet, but a spike low would be enough to validate. Technicals are net bearish, which again favors a move lower, but there may a quick bounce trade for a buy order near 24,500, to play for a move back to 26K.

I still think Bitcoin is going to test its 200-day MA before going higher, but if you think I’m wrong, then the subtle defense of 76.7K might be reason to take a long trade here. A stop goes on a loss of 76K. The other trade to consider is to fish in all the stops that are likely lurking below 76K; nick a long trade and play for a bounce to the 20-day MA. Beyond that, I would be expecting higher, but given the action since August, it’s unlikely to be pretty.

So we have Bitcoin as a possible long trade. The Nasdaq may be another long trade if we see a spike low below the 200-day MA. The S&P 500 can be played either side. The Russell 2000 ($IWM) is probably a better wait-and-see, as is the equal-weighted S&P.