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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Morning Gaps Higher Hold

Trump's overnight deal with China was going to cause a gap higher in the market. The challenge was whether this gap would be faded by shorts or if bulls would be able to push it higher. The end result was mixed as bulls were unable to add to markets off the open but the likely short fade never materialized - which is good.

The S&P tagged resistance from the October and November swing highs as it finished the day with a neutral doji.  Short term (buyers) will take profits here and aggressive shorts may try to attack the bounce but long-term investors can hold for another move lower before adding.

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Santa is off to the races

A good finish to the week left no doubts as to which side had control of the market this week. Bulls stepped up Wednesday and added a finishing touch Friday. Volume climbed in confirmed accumulation. Where possible, I have drawn new resistance lines connecting October and November swing highs which are the new upside targets for current market rallies.

The S&P hasn't turned fully net bullish (in technical strength) but it's only a couple of days away from doing so. The index finished Friday on its 200-day MA which may offer some resistance on Monday.  Get past that, then there is the 50-day MA before the index gets to challenge the resistance line from recent swing highs.

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