Thursday, June 04, 2020

Markets poised for new round of breakouts

It was day which left lead markets poised for fresh breakouts as they finished on resistance or just above resistance (now support). 

The S&P ended the day just below the February swing high (around 3,130) as volume climbed in resistance driven profit taking (and also ranked as distribution).  Technicals, aside from relative performance, are all bullish and show no signs of divergence; so the expectation would be for resistance to breach. 

The Nasdaq had managed to close the February breakdown gap late last week and broke this resistance this week. Today's selling, while falling under the umbrella of distribution, didn't violate support. The MACD has effectively flat-lined, so signals from it are of less value. The index has started to underperform relative to the S&P, but other technicals are good - particularly the trend in On-Balance-Volume, which marks strong accumulation, despite today's heavier selling.

The Russell 2000 had made a strong move yesterday to clear the narrow congestion which had consolidated around the low range of last week's bearish engulfing pattern. However, it still remains pegged by 200-day MA resistance but has the benefit of good technical strength. 

The Semiconductor Index has managed to make it as far as to challenge the pre-Covid19 highs. If this is able to break through it will bring the Nasdaq and Nasdaq 100 with it. 

Now it's a question as to whether the breakouts can materialize? Certainly, if doing a count back from the Semiconductor Index to the Russell 2000, the stage is set for a sequence of breakouts which will attract another round of momentum buying by traders. 

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

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