Small Caps have reached a support level that will determine how things will go for the rest of the year. In the case of the Russell 2000 (IWM), we have to consider what will happen around $209 as sellers confirm distribution; a loss of this level will end the trading range and project a measured move down and through the 200-day MA.
The Nasdaq gapped down to breakout support which is also a Fibonacci level on the daily time frame. Unlike the Russell 2000, the support level is not one at the bottom of its range - so a loss would open up for a test of the 200-day MA and a mean reversion move.
The S&P has also tested breakout support but has also tested its 50-day MA. If this support level gives way then there is a big gap down to its 200-day MA, which will cause a whole lot of pain should it occur.
All three lead indices have reached key support and with the week still young we could find ourselves in a very different situation by the time the week is out.
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