Bulls had another good day; a third good day in a row. The Dow capped the day with a breakout into what could turn a larger measured move higher. Volume rose in accumulation, and residual bearish technicals were negated on the move higher.
It was a roller coaster day, but the Semiconductor Index was the one to finish with an edge to the bulls. It looks like a break of 652 will happen sooner rather than later, with the swing low at 631 a handy place to mark risk (for a stop).
Headlines may have suggested otherwise for markets, but Small Caps had a rough day. The Russell 2000 lost over 1% in a slice through both 50-day and 200-day MAs. It's ugly because Small Caps have to re-establish a new price channel and each daily loss makes this new channel less and less bullish. Technicals are not net bearish, but they are not looking good either.
It was a second day of heavier volume selling in four for the S&P, and the fifth day of distribution since the last accumulation day. The breakout of 1,987 was undercut by Friday's close in addition to a finish below the 20-day MA. Bulls still have room for maneuver with the 50-day MA next in line for a test; even a modest rally Monday would be enough to return the S&P above its breakout. The higher volume selling is a concern, but not a deal breaker for bulls...yet.
It was a modest day for the S&P, Dow and Nasdaq indices, but it was a better day for the Russell 2000. The recovery in the Russell 2000 after the channel breakdown took a big step forward as it worked itself off its 50-day MA and finished above its 20-day MA. The breakdown remains, but this will likely shape itself into a broader (more shallow, and therefore more sustainable) rally.
Buyers made inroads into yesterday's relatively mild losses. The point of defense were 20-day MAs of the S&P, Dow, Nasdaq and Nasdaq 100. The Russell 2000 found its love at the 50-day MA, although the 20-day MA is only a few points above it. While this offers near term upside opportunity, it has been rare for the 20-day MA to act as a launch point for a longer rally. Don't be surprised if this MA is again revisited next week.
The S&P has perhaps the most to gain given the significance of 1,987 support as it looks to push beyond the psychological 2,000 level. If there is a concern it's that technicals are favouring an expansion of the weakness: a move to the 50-day MA may be needed first.