As Nasdaq, Russell 2000 Make New Highs, Keep Your Eye on the Volume

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On Thursday, stocks continued to move forward under the presumption that the major central banks would continue to provide “easy money” for at least two months or more.

Thus, “risk-on” continued from Wednesday (see Trade Of The Day). The 10-year Treasury note fell for the fifth straight day, but the Nasdaq rose 0.8%, setting a new record high for the second day, up 0.8%. The S&P 500 rose 0.7%, and the Dow industrials gained 0.5%. All eleven sectors of the 500 rose, led by real-estate stocks.

Crude oil prices rose and gold also gained, with the December contract up 1% to $1,344.70 per ounce.

At the close, the Dow Jones Industrial Average rose 99 points at 18,392, the S&P 500 gained 14 at 2,177, the Nasdaq closed at 5,340, up 44 points, and the largest gain of the day was made by the Russell 2000, up 18 points (1.48%). The NYSE’s primary exchange traded 853 million shares with total volume of 3.5 billion shares, and the Nasdaq crossed 1.9 billion shares. On the Big Board, advancers outpaced decliners by 4.7-to-1, and on the Nasdaq, advancers led by 2.5-to-1. Blocks on the NYSE rose to 5,188, up from 5,081 on Wednesday.

 Russell 2000 (IWM) continuation gap new hi
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As Nasdaq, Russell 2000 Make New Highs, Keep Your Eye on the Volume

While Nasdaq continued its vault into uncharted territory, the Russell 2000 as represented by its exchange-traded fund, the iShares Russel 2000 Index (ETF) (NYSEARCA:IWM), also jumped to a new 52-week closing high, but only by a mere 0.29 of a point.

Volume supported the new high, and it was also backed by a new buy signal from the MACD long-term indicator. Support for IWM is first at the top of the open gap at 124, then the 50-day moving average at 122 and the intermediate-term support line at slightly under 122.

Conclusion: A shift to “risk-on” fails to recognize just how high that risk may be. In every index that has gapped up this week, each gap is a “continuation gap” with at minimum a 50% chance that the gap will close before the overall trend resumes. However if the breakout picks up volume, the gap could be a “runaway gap,” and prices may head higher before a correction occurs.

So, if volume fails to support the breakout, expect the gap to be quickly “covered.” But if buyers jump in, the IWM could take off for a run of up to 10%. Today, of all days, volume could be the key to the strength of the breakout.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2016/09/russell-2000-nasdaq-highs/.

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