Sunday, January 31, 2016

Counter Break of Consolidation

Markets were setting up for a push lower, but Friday's upside break from consolidations triggered a wave of buying (and short covering). The buying was accompanied with higher volume accumulation. Shorts were left squealing by Friday's action, and new shorts will need to wait until Nov-Dec consolidations are tested before new positions are entered. Until then, short covering and long buyers rule the day.

The S&P has taken the first step of a rally to take it back to the supply zone of 2,000. Friday's action was accompanied by a MACD trigger 'buy' and On-Balance-Volume 'buy' trigger.

The Nasdaq cleared its consolidation. Next up is a move to the 50-day MA and then 4,900. Of the technical indicators, only the MACD trigger 'buy' was on record as a positive signal.

Nasdaq breadth improved sufficiently to generate a 'buy' signal, with all four metrics in oversold territory.

The Russell 2000 may have done enough to create a sizable 'bear trap'. Of the indices, it has the greatest potential for upside. Note the relative performance 'buy' trigger against the Nasdaq (and watch for one against the S&P too). Pullback opportunities may offer chances to catch the next upside swing. The 50-day MA/declining wedge resistance is the first upside target.

As a final note, breakouts were also noted in the Dow, Nasdaq 100 and Semiconductor Index:

You've now read my opinion, next read Douglas' and Jani's.

Share on StockTwits


Accepting KIVA gift certificates to help support the work on this blog. All certificates gifted are converted into loans for those who need the help more.

Follow Me on Twitter

Dr. Declan Fallon is the Senior Market Technician and Community Director for, and Product Development Manager for I also trade on eToro and can be copied for free.