Today Wasn't The Swing High For The Bounce

Friday's bearish doji had the natural look of a swing high for a bear bounce given the midline tag for stochastics and 20-day MA resistance - but this wasn't the case. In the end, it was another solid day of buying, bringing indices back to Thursday's highs. However, despite today's gains, buying volume was light and technicals remain mixed.

For the S&P, despite the lighter volume there was enough volume to reverse the 'sell' trigger in On-Balance-Volume.

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Bearish 'Inside Doji' Across Indices For Friday

Friday saw the return of sellers which left many of the lead indices with bearish inside doji; this pattern is typically viewed as bearish when momentum indicators like Stochastics and RSI are overbought, but in the midst of this bear market, the mid-line of Stochastics is seen as overbought, and this is where we are now. In addition to this, many indices are also up against 20-day MA resistance. We are seeking a point where the bounce loses the momentum it had as it faces overhead supply from panicked, and loss-holding, bulls. The only positive from Friday was the lighter volume on the selling.

For the S&P, this convergence of bearishness has also come with a bearish cross in 'On-Balance-Volume', but still has the MACD trigger 'buy'.The question is whether this will in fact be a swing high reversal, or will the index continue higher - looking at the 50-day MA as the next supply, reversal zone.

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Bounce is well established, but nothing more

Another day of gains has effectively confirmed the first swing low, so now we await the retest. Indices are quickly coming up against moving average resistance which is the first test of them.

The S&P is about to tag the 20-day MA on a MACD and On-Balance-Volume trigger 'buy'. While I'm looking for an eventual retest of 2,191 it doesn't mean the rally will be cut short soon. There is a sizable gap between the 20-day and 50-day MAs, which in itself is a possible trade opportunity, but it's hard to see this rally making it that far.

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The Bounce You Want To Avoid

It looks like we are in the process of the initial bounce, but it's a bounce which typically forces 'weak hand' buyers to panic themselves into positions; these buyers will quickly sell when markets start to retest Monday's lows. But, it's a start.

We - and America in particular - is a long way from the end of the Covid rampage. When death and infection rates pick up we are going to see markets weaken and then we will be looking at lows, or maybe new lows. On the plus side, trading volume was higher in accumulation.

The S&P improvements are working against a relative performance drop against the Russell 2000. Technicals remain weak and show no divergences. 

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