Small, Mid Caps Trading in a Recovery Channel

There wasn’t much to propel the market Friday, as a shortened holiday session with low volume provided little in the way of incentives for either buyers or sellers. The Dow Jones Industrial Average fell less than 0.1%, and the S&P 500 gained less than 0.1%.

The only corporate news of interest was that Walt Disney Co (DIS) reported ESPN subscribers fell by 3 million in the fiscal year ended Oct. 3. The 3% drop in DIS shares took 24 points from the Dow.

The U.S. dollar continued to rise against the euro, which closed the week at $1.06. As a result of strength in the greenback, gold fell 1.3% to $1,056.20 an ounce. Crude oil lost 3.1% at $41.71 a barrel.

At Friday’s close, the Dow Jones Industrial Average fell 15 points to 17,798, the S&P 500 lost a point at 2,090, the Nasdaq rose 11 points to 5,128, and the Russell 2000 gained 4 points at 1,202.

The NYSE Composite’s primary exchange traded just 388 million shares with total volume of 1.5 billion. The Nasdaq crossed 782 million shares. On the Big Board, advancers outpaced decliners by 1.5-to-1, and on the Nasdaq, advancers led by 1.7-to-1.

IWM Chart
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Chart Key

Last week’s low volume was to be expected in a holiday week. But for the small caps, it was the lowest volume of the year and could represent a lack of institutional interest in this key group of stocks.

iShares Russell 2000 Index (ETF) (IWM) is trading in an intermediate recovery channel with support at about $114 and significant resistance at its 200-day moving average at about $121. A close above $121 would be a strong positive, but the main inflection point is at the April and July highs at about $127.

MDY Chart
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The SPDR S&P MidCap 400 ETF (MDY) is also in a recovery channel. Friday’s half trading day produced a double-top at $268.20, which is just below the 200-day moving average at $269.90. The moving average is at the midpoint of a trading zone with support at $262 and resistance at $276. MACD issued a buy signal on Tuesday, a day with higher-than-average volume, which is a positive.


Holiday weeks are usually marked by low volume and high volatility, so we shouldn’t try to squeeze much significance out of last week. Nevertheless, the near- and intermediate-term uptrends continued, and that is at least a mild positive for the bulls.

A slew of economic reports this week could determine whether the Federal Reserve hikes near-term interest rates at its December policy meeting, so watch for comments from Fed governors.

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.

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