Markets Overview

Technical Market Overview

• RTY (Russell 2000): The Russell 2000 is showing signs of a potential trend reversal after reaching a local high of 2281.66 on July 23rd. Price action has formed a bearish engulfing pattern on the daily chart, with the index closing at 2209.08, below both the 9-day SMA (2246.78) and 13-day SMA (2241.77). The MACD histogram has turned negative (-8.65), signaling weakening momentum. RSI at 48.21 is neutral but declining, while Stochastic oscillator (38.74) is moving downward, suggesting increasing selling pressure. The index is currently testing the 50-day SMA (2171.45) as potential support, with the 100-day SMA (2080.13) providing a stronger support zone below. Volume has been increasing on down days, confirming the bearish sentiment.

• DJI (Dow Jones Industrial Average): The Dow has formed a bearish reversal pattern, breaking below its 9-day SMA (44638.51) after reaching an all-time high of 45146.30 on July 28th. The index closed at 44146.0, showing a significant bearish candle with above-average volume (144,847), indicating strong selling pressure. The MACD line has crossed below its signal line, generating a sell signal, while the RSI at 49.23 is declining from overbought territory. The Bollinger Band %B at 0.14 suggests price is approaching the lower band, potentially indicating oversold conditions soon. Key support levels to watch are at 44037.7 and 43791.4 (pivot points S2 and S3), while the 21-day SMA (44516.22) may act as immediate resistance on any bounce.

• SPX (S&P 500): The S&P 500 has formed a bearish engulfing pattern after reaching a new high of 6442.6, closing at 6343.6 with increased volume (63,836). The index remains in a strong uptrend, trading above all major moving averages, but showing signs of short-term exhaustion. The ADX reading of 34.34 with +DI (29.02) above -DI (12.40) confirms the overall bullish trend strength, despite the recent pullback. The MACD histogram has turned negative (-5.76), suggesting momentum is shifting. The Stochastic oscillator at 73.90 is declining from overbought levels, supporting the case for a potential pullback. Key support levels are at the 21-day SMA (6308.44) and pivot point S1 (6357.46), while the psychological 6300 level may also provide support.

• Broader Market Themes: A notable divergence has emerged between small caps and large caps, with RTY showing relative weakness compared to SPX and DJI. This divergence often signals caution for the broader market, as small caps typically lead market turns. All three indexes are displaying similar reversal patterns on their daily charts, suggesting a potential market-wide correction after the recent rally. The synchronized bearish MACD crossovers across all indexes reinforce this view. Volume patterns show increasing participation on down days, particularly in RTY and DJI, confirming selling pressure. From an Elliott Wave perspective, the market appears to be completing a five-wave impulse structure that began in April, with the current pullback potentially marking the start of a corrective wave. The 50-day moving averages for all three indexes will be critical support levels to watch in the coming sessions, as breaks below could accelerate selling pressure.