Third Day of Selling in a Row

It was another day for sellers to pressure weak-hand longs into dumping their positions. Despite the sizable losses, most of the indices have yet to reach an oversold condition. However, there is a shift in relative performance between the indices.

Losing out is the Nasdaq, it started the day at its 20-day MA but then gapped down to its 50-day MA. If the latter fails to hold then it's a long way to its 200-day MA. Stochastics are just about net bullish but it's looking likely this level won't hold. There are also 'sell' triggers in the MACD and -DI/+DI to consider. 

Next there is the S&P. It broke below its rising trendline from May on its way to test in the 50-day MA. Technically, there is also a 'sell' trigger in the MACD and -DI/+DI. The index is still outperforming Small Caps so there is still a chance for a recovery and a possible 'bear trap' if there is a close above the rising trendline.


Small Caps was a bit of a mixed bag. The breakout lacked the impetus to follow through and today's action effectively killed it. However, the relative performance of the index is better than both Large Cap and Tech indices, so it's not seeing the same level of profit taking as the aforementioned indices. Today's close left the index close to its 50-day MA with the 200-day MA not far below. The uptick in selling volume is a slight concern but it remains well down on the volumes of April-June. There are 'sell' triggers for the MACD, On-Balance-Volume and ADX to consider but if there is an index positioned to recover it's probably the Russell 2000. 


With the markets having suffered three sizable sell off days we are now in a position to consider what will happen when buyers next return. Bulls will not want to see a double top, which is a distinct possibility now that existing holders will be kicking themselves for not exiting sooner. The loss of the breakout in the Russell 2000 is disappointing but not hugely damaging, with a trading range the most likely outcome from this.  Again, until markets are oversold we can't consider a cash scenario. 

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

Share on StockTwits

---

Accepting KIVA gift certificates to help support the work on this blog. All certificates gifted are converted into loans for those who need the help more.

Follow Me on Twitter


Investments are held in a pension fund on a buy-and-hold strategy.

.

Popular posts from this blog

Round 2 for the bearish "black" candlestick in S&P and Nasdaq

Image
The Nasdaq started brightly but ended up closing below its open price, but above yesterday's close. The S&P did something similar, although the intraday range is narrower. These two setups are somewhat complicated by the new 'buy' triggers in On-Balance-Volume for both the Nasdaq and S&P. And the new MACD trigger 'buy' for the S&P. Price action is key, so I would expect the candlestick to trump the technical picture; watch for lower prices tomorrow.
Read more

Friday's gap downs bring indices close to support. Semiconductor Index at 200-day MA.

Image
Friday's big gaps lower have the potential to become breakdown gaps, but for now, the near term oversell has for a possible move into the gap price vacuum. The index most likely to achieve this in the coming days is the Russell 2000 ($IWM). The Russell 2000 ($IWM) finished with a neutral doji, just above its 50-day MA and in a thick band of support between $207.50 and $210 marked by the summer swing highs. Technicals have followed price action with new 'sell' triggers in On-Balance-Volume and ADX, but intermediate term stochastics haven't reached the mid-line that is typical support in bull markets. Aggressive bulls can look for a move to test the underside of the 20-day MA. The S&P was unable to hold its 50-day MA on Friday's open, and instead found itself toying with the May swing high. More significant support is likely to be found around 5,265, so if there is an undercut of Friday's low then this will be the next port of call. More concer...
Read more

Russell 2000 ($IWM) Records Accumulation Day As Technicals Turn Net Bearish

Image
Options expiration will have clouded the volume picture, particularly for the S&P, but it was a day for buyers to build some momentum into the Santa rally. The FOMC rate statement put a huge dent in prior rallies, with the S&P now having to deal with a 'bull trap'. Although it was the Russell 2000 ($IWM) that finds itself most on the back foot having undercut its 50-day MA, and now looking at the 200-day MA as its next test. It was the only one of the lead indices to turn net bearish in supporting technicals; the November breakout gap is no more. What's more likely is a new trading range, bound by November highs, with the $205 level a possible support level.
Read more

Archive

Show more