Bearish cover undermines nascent bounce

Since October's sell-off, down days that racked up losses of 3% or more have garnered much media attention, but the action of the last two days looks a lot more bearish than one of those big sell-off days.

The Nasdaq posted a small bearish black candlestick on Wednesday, which was followed by a small bearish engulfing pattern today. Given this followed from an earlier bullish hammer, it now looks like this bounce is losing momentum and another push towards sub-6,800 is on the cards. There is an uptick in relative performance (vs the S&P) but I wouldn't be looking for this to last.

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Markets struggle to build on yesterday's bullish 'hammers'

It was a good finish for bulls on Monday but there was a lack of follow through on what should have been a good day for buyers.  However, damage was still relatively light. Technicals for the S&P reverted to a net bearish state as other indices lost ground.

The S&P cut into yesterday's spike low but not enough to negate the bullish hammer. I would look for another spike low and would measure risk on a break of 2,580.

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Russell 2000 breaks support; other indices to follow?

A tough close for markets on Friday.  The week finished with a decisive break of support for the Russell 2000 which undercut the prior double bottom - this sets of a bad precedent for other indices. There is still a chance for a 'bear trap' but markets will need to recover 1,465 over the next few days - Monday preferably. To add insult to injury, technicals are all net negative and relative performance accelerated lower.

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Trump punches Santa in the stomach

Well, that didn't last long, Trump's comments on Chinese tariffs stuck a knife in the rally but the damage wasn't total. Anyone who shorted or sold the resistance test in the S&P will be happy, but breakout buyers in the Nasdaq will have been stopped out as a 'bull trap' is confirmed.

The S&P gave up both the 50-day and 200-day MAs as the rate-of-change remained in sub-zero territory throughout the rally. Both the MACD and On-Balance-Volume are holding on to their bullish signals but there needs to be a sharp recovery (starting Thursday) if these signals are to hold. Investors were offered another 'buying' opportunity as part of the buying the dips after the Oct/Nov 'buy' signals.

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