As the new year commences, major indices such as the S&P 500, Nasdaq, and Russell 2000 are hovering close to record-breaking levels. While the possibility of some indices forming double tops, especially when analyzing monthly charts of the S&P, exists, the clearing of the 2021 high in the coming weeks could mitigate this risk. Notably, there has been minimal profit-taking in the markets since the October rally. For the S&P, keeping an eye on the 50-day MA might present a compelling opportunity for buyers in case of any profit-taking at the start of 2024.
S&P 500-Monthly Chart
The Nasdaq, in comparison to the S&P, has not stretched as much, potentially leading to a higher pent-up demand if sellers attempt to influence its performance. While the MACD signals a ‘sell,’ other technical indicators remain robust, and the selling volume significantly lags behind recent buying activity.
NASDAQ Composite-Daily Chart
The Russell 2000 ($IWM) has yet to fully recover to its 2021 peaks. However, the year-end witnessed a ‘golden cross’ between the 50-day and 200-day moving averages, signaling a trend reversal in favor of the bulls, a feat already achieved by the S&P and Nasdaq. Similar to the other indices, the Russell 2000 exhibits robust technicals, and the selling volume has been light.
IWM-Daily Chart
Looking ahead, the aim is for the October trend to persist, with an expectation for profit-taking by ‘weak hands.’ The Russell 2000 ($IWM) holds the potential to attract buyers as a “value” index in contrast to the S&P and Nasdaq. All eyes will be on the market as traders regroup after the break.
