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Nasdaq 100 And Russell 2000

|Includes: SPDR Dow Jones Industrial Average ETF (DIA), QQQ, SPY

Summary

Correction on the Russell 2000

Breadth sentiment on the Nasdaq 100

Nasdaq 100 (QQQ) index was modestly up today. DJI (DIA) and S&P 500 (SPY) were flat. However, there were some interesting events behind today's neutral (on first view) trading:

  1. Russell 2000 index broke down from is the side-way trading. Now, we may say that the Russell 2000 index is officially in a correctional move down.
  2. Number of the Bullish stocks on the Nasdaq 100 index dropped to 65%
    https://www.marketvolume.com/quotes/highlowrangechart.asp?s=NDX
    This is the lowest Breadth level since 11/4/2016.

The correction on the Russell 2000 is important because most of the market corrections start from Small Cap stocks. When uncertainty occupies the market, the Small cap stocks (covered by the Russell 2000 index) are the first in the line to be dumped. Now, we have to wait whether the worries in Small cap market sector will spread to Large cap (DJI, S&P 500 and Nasdaq 100).

The Breadth sentiment on the Nasdaq 100 is the lowest since the Trump's election. This is not the bearish sentiment, we still have more Bullish than Bearish stocks on the Nasdaq 100 index. However, this is the weakest sentiment over the past 12 months. The worst part is that similar weakening was last time seen at the bottom of 5% correction - now, it is witnessed at the top.

The market has became very sensitive and if something triggers a correction, we will be looking for stronger than 5% decline on the Nasdaq 100 index.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.