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Beware 1200 On The Russell - Breadth Breakdown Is Big Risk To Small Caps, BofA Warns

The US equity market struggled last week but the S&P 500 held the rising 200-day MA once again, but as BofAML notes, the much broader-based NYSE stalled at 200-day MA resistance last week. The NYSE has a potential head and shoulders top as well as a breakdown for the NYSE stocks only advance-decline line through the March low. Similar to the NYSE Comp, the Russell 2000 also shows a potential head and shoulders top with a breadth breakdown a big risk to 1200 support...

Via BofAML,

NYSE: 200dma holds as resistance; Big support = 10,600 Unlike the S&P 500, which held its 200-day MA as support last week, the NYSE stalled at 200-day MA resistance last week. The NYSE has a potential head and shoulders top as well as a breakdown for the NYSE stocks only advance-decline line through the March low. This breakdown for breadth is a potential leading indicator for a breakdown in the index below its early July and March lows at 10,659-10,622 toward 10,060-9886 (projection and October 2014 low). It would take a move above 11,032-11,170 to improve the pattern.

Russell 2000: A-D breakdown is risk to big 1200 support

Similar to the NYSE Comp, the Russell 2000 also shows a potential head and shoulders top. After holding its 200-day MA in late July, the Russell 2000 broke and closed below this important longer-term moving average on Thursday and Friday. This coincides with a fresh break to new lows on the small cap advance-decline line and places big Russell 2000 support at 1212-1206 or 1200 at risk. Below this support would confirm a top and suggest deeper risk to 1154-1134 (early 2015/late 2014 chart support) and then 11151110. First resistance comes in at 1245-1255 but the potential head and shoulders top is intact while below 1268-1278.

Another bearish sign for market breadth. The S&P 500 has held its 200day MA as support while the more broad-based NYSE Comp has met resistance at is 200-day MA in recent sessions. The small cap Russell 2000 has broken below its 200-day MA after holding it as support in late July.