Sunday, February 09, 2020

Nasdaq Holds Breakout with Large Caps Recovering From Bear Traps

Last week didn't see a particularly strong breakout in the Nasdaq but it still managed to hold the move by Friday's close. There was a small uptick in volume, but better was the supporting technical picture; in particular, relative performance against the Nasdaq and accumulation trend in On-Balance-Volume. It's also a counter move against an earlier 'bear trap'.


Also contending with a 'bear trap' was the S&P and Dow Jones Industrial Average. The former spent most of last week inside its rising channel, but the return inside the channel for the Dow Jones Industrial Average is more recent.

The S&P finished the week with a MACD trigger 'buy' in support of a recovery in the ADX. The index has been outperforming the Russell 2000 since December, and has been undergoing accumulation since October.


The Dow Jones Industrial Average recovered from its 'bear trap' as happened with the S&P. The MACD closed the week with a 'buy' trigger. However, it has a long standing underperformance against the Nasdaq 100 to reverse, so this buying is coming relatively late in the cycle in a move to more defensive stocks.


It wasn't all sunshine. The Russell 2000 dropped out of its channel in January and this bounce has so far come up short in making it back as happened in Large Caps. There are 'sell' triggers for the MACD, On-Balance-Volume and ADX - offset by Stochastics 'buy' signal. Relative performance remains very weak.


For this week, traders are looking to more defensive issues with buying in the S&P and Dow Jones. However, the Nasdaq is offering opportunities for traders more interested in growth stocks. Small Caps remain vulnerable, which isn't good in the long term but so far hasn't experienced significant damage.


You've now read my opinion, next read Douglas' blog.

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Investments are held in a pension fund on a buy-and-hold strategy.
 
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