S&P 500, Nasdaq bulls set to defend support; Russell 2000 eyes rebound

Monday will be the time to make a decision on the price, as last week’s selling broke above support but also broke an uptrend line. The selling undercut the 20-day moving average with a “sell” trigger in the MACD.

Signs are pointing down, with money moving away from large cap stocks to small cap stocks, but Monday is an opportunity for buyers to step in and defend support.

After Wednesday’s bearish gap, selling volume has decreased, which may be a sign of complacency or a genuine lack of interest in taking profits at this point.

The results may indicate what lies ahead for the S&P 500. It has already broken through trend support, its 20-day moving average and breakout support. Next comes the 50-day moving average before we start looking at the March high as a possible support level.

The Nasdaq has “sell” triggers in the MACD and ADX, but there has yet to be a confirmed distribution; a capitulation to the 50-day MA could provide an anchor for a swing low.

The index that is bucking the trend is the (). After a very successful breakout, it could not escape the wave of selling that stormed the S&P 500 and the Nasdaq last week.

The technical data is clearly positive and even if selling were to continue, it would probably take the whole week for the index to return to the breakout support.

As a closing point, also watch the . It ended Friday undercutting its 50-day moving average on sharply bearish technicals. Short-term stochastics are oversold but have yet to create a scenario that could provide a buy signal. Expect prices to hold around 5,200 as part of a test of support. If there is an index that could post a bottom on Monday, then this is the one that is most likely to do so.

On Monday, watch for a test of support on the S&P 500 and the semiconductor index. If successful, this could be a good week for a rally in these indices. The Russell 2000 ($IWM) is moving counter to the S&P 500 and Nasdaq. If the S&P 500 and Nasdaq falter, expect the Russell 2000 to benefit.