The Russell 2000 is Traders’ Best Bet

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On Monday, stocks pulled back following a rally on Friday that led the third quarter to be the best quarter of the year.

An uptick in interest rates and a tick up in the dollar vs. a basket of other currencies was blamed for the fall. And a failed agreement with Deutsche Bank AG (USA) (NYSE:DB) and the U.S. Department of Justice over a fine of $14 billion put pressure on the financial sector to the tune of 0.4%.

Volume was relatively light due to a German holiday to celebrate reunification. However, that didn’t stop German sellers from placing orders on the NYSE, driving DB down 0.84%.

Crude oil (WTI) rose 1.2% to $48.81 per barrel, but energy stocks failed to follow through, falling on profit-taking after a rally last week.

Eight of the eleven S&P 500 sectors lost yesterday, with real estate (-1.8%), utilities (-1.4%) and consumer staples (-0.6%) the worst performers. The dollar’s strength put pressure on gold (December), which fell to $1,312.70 per ounce, a minor loss.

At the close, the Dow Jones Industrial Average fell 54 points to 18,254, the S&P 500 lost 7 points at 2,161, the Nasdaq closed at 5,301, down 11, and the Russell 2000 fell 6 points to close at 1,246. The NYSE’s primary exchange traded 820 million shares with total volume of 3 billion shares, and the Nasdaq crossed 1.6 billion shares. On both the Big Board and the Nasdaq, decliners outpaced advancers by 1.4-to-1. Blocks on the NYSE fell to 4,370, down from 5,640 on Friday.

Nasdaq bullish but flat
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With the Nasdaq stuck in a range right now, it looks like small caps on the Russell 2000 are the best way to play right now.

The major indices, after a good showing in Q3, have had difficulties lately. And none moreso than the Nasdaq. The index, which is known for its reliance on technology stocks, failed to follow through, appearing to be stuck at the top of a trading range of 5,100 to 5,300. It recently made a new closing high at 5,340, creating a gap (not highlighted) at 5,300 to 5,321, the top which now becomes resistance.

Conclusion: The major indices are still bullish, but time is running out. As noted yesterday, the exchange-traded fund iShares Russell 2000 Index ETF (NYSEARCA:IWM) has the best channel trend, and so small caps vs. anything else appear to offer traders the best opportunity for gains.

Note: For those with interest in my 17-month S&P monthly: Sorry, the technology gnomes are still halting progress, but we’ll beat them back.

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/2016/10/nasdaq-bullish-stalled/.

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