Typical Pre-Holiday Trading Day

June 30, 2006 · Print This Article

Today was a typical pre-holiday trading day. After a sharp rally the market decided to consolidate today on low volume. The low volume was anticipated as traders always leave early on an extended holiday weekend. During the latter part of next week volume should pick up and this will certainly give us a better indication as to which direction the market is headed over the short-term.

The Russell (IWM) was the standout index today. The broad small-cap index is nearing overbought levels that usually precede a short-term decline. There is still a little room to move higher, so if it does be on the lookout for a short-term reversal. I must point out that trading off of overbought levels is not as accurate as oversold levels but given the current overbought reading of the IWM (75.5) the probablity of a reversal is increased. If IWM does indeed reach a very overbought state (RSI (5) of 80 or higher) we could see our first signal in the ETF in quite some time. There is also some strong overhead resistance as the IWM is approaching its 50 day moving-average (72.19). Next week should be intersting to say the least, but until then I plan on thoroughly enjoying my extended holiday weekend. The market will only be open a half day on Monday so a low volume day coupled with sideways trading is anticipated. Until then, have a safe and wonderful holiday.

RSI Wilder (5) for June 30, 2006