During late September 2022 the Russell 2000 (RUT) index of small cap stocks struggled to go lower. Now in early October its leading US stocks higher. A review of external momentum indicators imply the rally could continue for several weeks.
The daily RUT chart courtesy of Trading View updates the price and momentum action.
On 10/04/22 RUT was up 7.6% from its 09/27/22 bottom vs. the S&P 500 (SPX) 5.8% rally from its 09/30/22 bottom.
Stochastic has a bullish lines cross over, RSI has a bullish cross of its moving average line, and MACD has a bullish lines crossover. MACD is the slowest of the three indicators and gives fewer signals. Note the most recent bullish lines signal came on 06/30/22, price subsequently rallied for several weeks.
The weekly SPX chart courtesy of BigCharts.com illustrates long- term momentum.
During the prior two weeks price was marginally below the lower Bollinger band. This week price has moved above the lower band – a bullish signal.
Weekly Slow Stochastic reached an extreme oversold condition and now has a bullish crossover.
Weekly RSI has a bullish divergence. Daily SPX – RSI also has a bullish divergence at the 09/30/22 bottom.
Weekly MACD has bullish divergences however, there’s a weekly bearish lines crossover that occurred a few weeks ago. The message from weekly MACD is currently inconclusive.
Unless there’s a bearish event that’s not factored into stocks, the balance of evidence from daily and weekly momentum implies US stocks could rally for several weeks.
Correction to errors in the blog “Elliott Wave Alternate Bullish Interpretations – 09/30/22”.
The most important part of trading or analyzing markets is never to assume certainty in future market movements.
The following statements were made in the prior blog.
“After the Expanding Flat the primary trend resumes, with the SPX ultimately making new bear market lows.”
“After completion of the rally – Minor wave “X” the primary trend resumes , with the SPX ultimately making new bear market lows.”
The word could instead of ultimately should have been used in both statements.
After completion of Expanding Flat and “X” wave corrective patterns the primary trend resumes. However, there are occasionally truncated waves that fail to exceed the high/low price extremes of corrective waves.
It’s possible that a down movement after a post September 2022 rally could hold above the late September bottoms. If this scenario were to happen it could create a triple bottom that marks the completion of the 2022 bear move.
Stay objective in market analysis/trading – never assume certainty in market movements.