Markets Tease Follow Through But Are Not There Yet

It's looking ever more likely that current consolidations experienced by markets will resolve to the upside with new breakouts. However, markets are taking their time before doing so.

The S&P closed with a 'gravestone' doji just below 3,025 resistance. Typically, this is a bearish candlestick but given volume was significantly lighter then it's more likely to become part of a consolidation; one, which leads to an eventual breakout.

The Nasdaq flashed an 'inverse hammer' below resistance - matching sub-resistance at 8,240. However, trading volume was below typical trading volume. While this index may be a while from a new breakout, it is enjoying an improvement in relative performance, although it hasn't yet generated a new 'buy' signal.

The Russell 2000 did experience a loss, not surprising given the susceptibility of Small Caps to profit taking in the face of market uncertainty. The rally is well above support and the struggles of August, so the market participants can be forgiven for the profit taking.

The Semiconductor Index has managed to challenge the 'bull trap' but has yet to clear the consolidation. This will likely be the first index to break, which should help the Nasdaq and Nasdaq 100 get closer to clearing their consolidation.

The relationship between the Dow Jones Transports and the Industrial Average has returned to the bearish picture, but if there is an upside breakout it will be significant - significant in a secular, bullish manner. It's perhaps the relationship closest to watch at the moment.

Watch and wait. Bulls are looking more likely to win out but indices remain range bound.

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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