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Nasdaq Holds Breakout with Large Caps Recovering From Bear Traps

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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'.

Bounce Continues With Volume

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Buyers worked the bullish harami as a swing low with a second day of buying, this time on higher volume accumulation. Biggest winner of the lead indices was the Russell 2000, but all indices benefited. The gains in the Nasdaq counted as a breakout yesterday but volume was light. Today's gain registered as a bearish black candlestick, with the index closing below its open price. Despite the opening loss, it didn't reverse the breakout. If prices can stay above 9,400 it would complete a return to net bullish technicals with a MACD trigger 'buy'.

Bulish Haramis Attempt to Establish Swing Lows

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There was a reluctance on the part of traders to react to the bearishness of Friday' trading, although today's buying came on significantly lower volume. The 'inside day' of Monday's trading ranks as a bullish harami over the last two trading days - a bullish pattern. For the S&P, this buying didn't contribute much to arresting Friday's selling volume as many of the indices failed to recover channel support.  Relative performance remains strong (versus Small Caps) although other technicals are drifting, the MACD in particular.  Some could argue today's buying marked a return to channel support, but it's not a substantial recovery.

Indices Break Channels

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Friday was a return to the selling which started the week; the Monday gap down and Friday's selling bound small gains into the gap. Friday's selling also brought with it channel breaks across many of the indices. The S&P closed at its 50-day MA, at a point where the potential 'buy' signal from earlier in the week is now under pressure from a stop-out if the 50-day MA is breached. Technically, there was an acceleration in the MACD trigger 'sell' and an ADX 'sell' trigger, but offset by an acceleration in the relative performance against Small Caps.

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