Monday, October 26, 2020

The week opens with sellers controlling early action

With the weekend to stew over things, sellers began the week pushing markets below 20-day and 50-day MAs. No index escaped the selling but whatever bullishness was there from Friday was quickly dissipated on Monday's action.  

The Nasdaq wasn't the worst hit, but it was enough to expand on the 'sell' trigger in the MACD and bearish crossover in the ADX. The index is underperforming the Russell 2000, which also suffered a loss today. 

There was no safety in Large Caps. The S&P took a bigger hit than the Nasdaq, with technicals similarly damaged; although only the MACD and ADX are bearish - so it hasn't yet spread to stochastics or On-Balance-Volume. 

The Russell 2000 managed to claw back early losses to finish inside the bullish handle. The index is still outperforming both the S&P and Nasdaq, but both of the latter indices are making up lost ground as the consolidation plays out. It's not as technically damaged as other indices but this didn't stop it from returning a MACD trigger 'sell'. Buyers can still rescue it, but a close below the handle would change the context of the consolidation. 

Markets didn't start the week on a positive note and the loss of 20-day and 50-day MAs took away key support for launching a continuation of the rally to take out the last swing high. Unfortunately, markets will drift lower in the absence of traders - it takes active buying to drive a rally, but apathy will lead to losses - and it looks like traders are checking out. With the election approaching fast it's hard to see traders committing too much; at least, not as a buy-and-hold beyond next Tuesday. Day traders will stick around, but it's hard to see big decisions been made for the remainder of the week.

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.