Wednesday, May 06, 2020

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'. 

The Nasdaq managed small gains but not enough to generate a fresh breakout. Technicals are all positive, including a relative performance advantage against the S&P, so it's still the index most likely to breakout. 


The Russell 2000 had broken rising support but remains above breakout support. However, it's underperforming against the Nasdaq and it's the most distant from its swing high. Small Caps are a required leadership sector in a bull market and its early promise has since stalled. We are still looking at a struggling market. 

With the Nasdaq best placed to rally it's somewhat concerning to see the Semiconductor Index struggle. Today's close saw a 'sell' trigger in the MACD coming off a breakdown in the rising trendline. 

For the rest of the week we need to see the Nasdaq lead out the weaker S&P and Russell 2000, but its the Russell 2000 which really needs to push ahead in relative performance and it's hard to see it happening at the moment. 

You've now read my opinion, next read Douglas' blog.

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