Thursday, November 05, 2020

Recent Buying Remains Range Bound

Election week buying has managed to undo much of October's selling, but for all the enthusiasm it doesn't change the broader consolidation which is an index caught between Autumn peaks and swing lows.

Technicals for the Nasdaq returned to a net bullish picture but the index now finds itself back at - what had looked to be - a double top. As J.C. Parets has noted, how many times do you see a triple top? Not very often, so we must consider this test of resistance is part of a larger move higher. 

The S&P has similarly managed to post strong gains, but not enough to challenge the October or September high. Technicals are net positive following the successful test of the September swing low. I would be looking to the Nasdaq for leads; if the Nasdaq can break double top resistance then one can look to the S&P to follow suit soon afterwards. 


The Russell 2000 managed to get itself beyond the October swing high, but it has larger resistance from swing highs in 2018 and 2019 to get past. Are we seeing the start of a repeat of 2012/13? If the Russell 2000 is able to get past $169 it would open itself for a rally which could last for most of 2021. 


The election is likely to deliver a market ideal of a cross party administration; a Biden victory and a Republican Senate. This scenario offers the foundation for a break of the various double tops which have shaped the summer of Covid19. I would be looking for the formation of trading handles at resistance tests before an across the board follow through move higher.

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.

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