Wednesday, October 02, 2019

Sellers Put Some Distance on Prior Action

There was a bit more impetus to today's action as sellers took another swipe at markets. Existing - broad - trading ranges remain the dominant influence but some indices are closer to dropping outside of these ranges than others.

The Russell 2000 will likely see a challenge on the August 'bear trap/; if not tomorrow then probably before the week is out. Technicals are net bearish but not oversold, which suggests there is room for more downside and if a crash was to emerge then it's not going to happen until the index is oversold.

The Nasdaq is heading towards the its 200-day MA and is smack bang in the middle of its trading range. Technicals are also negative and distribution days have outnumbered accumulation days in recent weeks. Not surprisingly, relative performance (vs the S&P) has accelerated lower. So while the current position of the Nasdaq is still too early to suggest a trend shift, there is a suggestion lower prices are ahead based on the technical picture.

The S&P is still well above its 200-day MA despite today's loss. It hasn't yet lost the mid-line support of stochastics, which means the pattern is still bullish. It remains the lead defensive play but will struggle if the Nasdaq and Russell 2000 keep falling.

For tomorrow, keep an eye on the Russell 2000. If it loses support then it's going to be hard to see the Nasdaq defend its 200-day MA or the S&P to stay on the bullish side of the market.

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.