The Russell 2000's Blood to NASDAQ's Wine

---

If you believe that amidst the bloody falling knife of the Russell 2000 there’s still a reason to pop a cork on a vintage bottle of wine, Nasdaq is the best potential fruit of the vine to imbibe.

Furthest from the 200 week moving average of the four indices and holding on for dear life to the 23 month moving average, QQQs may not look as sexy as it did, but with a quick shower and a pound of makeup, NSAD(Y) cleans up nicely.

The Russell 2000 broke the 200 WMA last week. QQQs would have to fall another 17% to see its way to 86.85, where the 200 WMA sits.

If…you believe.

In terms of probability, the recent bloodbath by IWM suggests that NASDAQ can follow in kind. The next major moving average support in the Russell’s is the 80-month MA at 90.40.

So, it does makes sense that if IWM is destined to fall to that level, NASDAQ can fall to the 200 WMA.

What is the probability the market rallies from here?

Nobody will argue that the market has reached oversold territory. Yet, that to me is not as meaningful a reason for a rally beyond the very annoying cliché of seeing a dead cat bounce.

Although I am focusing here on NASDAQ and the Russell’s, it’s wise to look at the other two indices the S&P 500 and the Dow.

The Dow is close to the 200 WMA at the 157.50 level. For SPY it’s 178.10. If you think beyond a bounce and look out longer term, the law of attraction does give me thought that at some point, we will see those 200 WMAs tested in at least one other index besides IWM (which is now well below)

After all, Granddad Russell has yet to lead me astray as my Modern Family Patriarch and the real leader of the free world. And let’s face it, if that is the nucleus of the US economy, the only fundamental reason to see a sustained rally, is if the US can prove it will remain economically sound in spite of everything happening around the globe.

So what else is there to look at?

Best I see is, believe it or not, the Federal Reserve’s Policy going forward. Maybe because they have yet to deny the intended schedule of four more interest rate raises this year, which suggests relative optimism, I am more focused on TLTs or the long bonds than I am on the oil market.

Besides, since solar jobs already surpass oil jobs in the US, watching TAN if you want to watch energy, might be the new “barometer.”

Add that up and here’s what we got:

1. QQQs if can hold the 23 month by end of January, good clue that worst is over.
   2. If not, expect at least one other index to visit the 200 WMA.
   3. Keep eyes peeled on interest rates. The longer the flight to safety lasts, the longer it will take for FED to continue its rate raising schedule, the longer we can feel any sense of confidence in the market.
   4. Watch solar energy as the new “oil” barometer. With TAN dropping to the lowest levels since July 2013, I’m not holding my breath for a bottom. However, I find comfort in knowing where to look for one.

“But now that I've tasted blood, Now this wine tastes too thin.”-Dustine Kensrue Blood and Wine

S&P 500 (SPY) Far from the 200 level now so have to think 182.95 August level next. Unless it can clear 190 early with buyers. Subscribers: Negative Pivots in all

Russell 2000 (IWM) I’d say maybe blow off with the double the average volume, but technically, that would mean to me more of that dead cat bounce than a bottom.

Dow (DIA) 160 nearest support on the daily chart. Over 165 I would bite.

Nasdaq (QQQ) 104 resistance 100 round number support. Let’s start there

XLF (Financials) 20.74 the 200 weekly moving average here

KRE (Regional Banks) 36.30 the 200 WMA here-close

SMH (Semiconductors) 4 years of the bull move seems right. Its over for now-good news, one day it will be back

IYT (Transportation) Broke the 200 week moving average last week along with IWM-2 great barometers

IBB (Biotechnology) Mother of all bear flags paying off

XRT (Retail) Granny get your Addyi

GLD (Gold Trust) Interesting but Silver was more interesting

SLV (Silver) Got right to the 50 DMA and stopped. So if it clears might take a shot. You all know by now how much I think commodities will have a turn

USO (US Oil Fund) Inside day, huge volume, way oversold. A bounce-yeah-likely

UNG (US NatGas Fund) Inside day under the 50 DMA-can watch the way the range breaks

TAN (Guggenheim Solar Energy) 25.25 was the bottom in 2015. Watching to see if it takes that back or not

TLT (iShares 20+ Year Treasuries) 124 pivotal

UUP (Dollar Bull) Inside day just above the 50 DMA-if breaks 25.65 could see a move back to 25.30

FXI (China Large Cap Fund) .03 RSI on the daily