Showing posts from May, 2020

Strong finish on Friday for S&P and Nasdaq as Russell 2000 struggles.

The week closed strongly with volume rising in confirmed accumulation across indices.  The S&P remained above its 200-day MA on increasing accumulation (rising On-Balance-Volume) as relative performance against the Russell 2000.and Nasdaq remained weak. The index remains on course to challenge the mini-swing high from February - a milestone already achieved by the Nasdaq.

Percentage of Nasdaq Stocks Above 50-day MA gets near 90%

Interesting times for markets as breadth metrics which became heavily oversold in March are now becoming heavily overbought on the upside. Ultimately, the heavily oversold condition in March helped create the conditions for the rally - so will the heavily overbought condition go the other way? The Percentage of Nasdaq Stocks above the 50-day MA is well above the peak from January 2020 - and the peak for this metric at any point since its inception; 84.67% was the last peak in May 2003 - but if you consider this, what followed in May 2003 was a continuation of gains for another 5 years, up until the credit crisis in 2008. 

Nasdaq waits for other indices to follow its lead

Investors have been keen to buy tech stocks but there has been a general reluctance to buy into other Large Caps and smaller growth stocks - a few exceptions aside.  The Nasdaq had edged a breakout into the February gap down but didn't fill this gap; typically, when trading enters a gap it usually closes it quickly because there isn't historic supply or demand to stall the action. But this hasn't been the case for the Nasdaq. As a result, the index is sitting on breakout support, waiting for buyers to push things higher. On a positive front, all supporting technicals are bullish. Also, trading volume has remained robust - there is still interest in tech stocks. 

Markets Reach Decision Point

Another resistance level reached - another level to break. The Nasdaq looks to be first in trying to push beyond the level established by the February gap down. If it succeeds, then it will have the upper level of that gap, then only the February high before we are talking of Covid as yet another V-recovery. I think the more likely outcome is a broad trading range, bound by the February and March high/lows. But, for now, buyers don't seem done yet. 

Buyers push gains as challenges remain

A strong start to the week was backed by bullish accumulation across indices. There is still overhead resistance to contend with but today's close was enough to see indices approach breakdown gaps from the Covid sell off. The S&P broke into the 'bull trap' zone but remained pegged to 200-day MA resistance. However, the breakout didn't reverse relative underperformance against the Russell 2000.

Buyers can't reverse week's losses

The week started with losses but the buying of Thursday and Friday wasn't enough to claw back those losses. Buying volume was lighter than earlier selling so there are still doubts traders have the desire to push this to new (pre-Covid) highs.  The S&P does have some bullish markers to work with. Despite the lighter volume buying from Thursday and Friday, On-Balance-Volume is on a 'buy' signal as Stochastics [39,1] are in comfortable bullish territory. The index is outperforming the Russell 2000, but is lagging the Nasdaq. 

Indices fail in their first Advance - A Second is in the Making

Tuesday's action marked the failure for the first challenge of the April swing high; volume climbed to register as distribution as profit takers struck the market in force. Today saw some stabilization of these losses, but buying volume was down on recent selling, so it remains to be seen if this is the making of something more substantial. The S&P is lingering around its 20-day MA. Today's buying ranked as a bullish piercing pattern but the strength of this candlestick requires an oversold condition, which is not the case here.There is also the MACD trigger 'sell' to consider, although other technicals are bullish.

Nasdaq adds to breakout on light volume

Market action remained somewhat low key with only the Nasdaq trading any action of note. The Nasdaq is fast approaching  next resistance level of the February(!) breakdown gap - this will probably the last point of attack for shorts as going beyond this will fill (and therefore, negate) the breakdown gap. Trading volume for the index was well down on yesterday. 

Breakout for Nasdaq

Do we have a resolution to the trading range with the Nasdaq now posting a new swing high for the March rally? Must be the 20 million job losses was considered better than the 22 million expected :(  Hard to fathom why the gains, but its during times of doubt when substantial money remains on the sidelines that a gradual return to the market can fuel these rallies. Remember, trading volume from the middle of March to the end of that month was substantial and anyone who bought during that period will be sitting on profit and not likely keen to take profits - keeping supply tight.  Just to add to Friday's breakout in the Nasdaq, volume climbed to mark accumulation. 

Light selling keeps resistance intact

Indices had looked ready to break beyond last week's swing highs, but in the end they weren't able to push through but the damage was minimal.  The S&P had a small bearish engulfing pattern to yesterday's doji. On a positive front, yesterday's action closed the breakdown gap even if it ultimately wasn't able to challenge the 'bull trap'. 

Market Gains Don't Reverse Damage

There were modest gains across the indices as markets digested last week's losses. The 'bull trap' and gap down remains a major concern for the S&P as today's buying only made a small indent into those losses. Volume was lighter as On-Balance-Volume looks ready to whipsaw back into a 'buy' signal.

'Bull Trap' in S&P

Based on recent price action Friday's loss was relatively light, but it could prove to be of greater significance in the weeks ahead.  It chalked two bearish markers in confirming a 'bull trap' and creating a gap down in the process. Friday didn't register as a distribution day although there was a bearish cross in On-Balance-Volume to mark a shift back in favor of sellers. Ironically, it's making a relative improvement gain against Small Caps. Is this the time profit takers take over in a race to the bottom?


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