Showing posts from December, 2020

Large Caps Suffer Some Softness

As Christmas approaches there wasn't a whole lot to add on today's trading. Indices were mostly able to add a little on yesterdays bullish reversals, although most of the games were booked at the open and stayed there for most of the day.  Only Large Caps suffered some weakness, but it was pretty modest.  The Nasdaq managed a new closing high on lighter volume. Technicals remain nest positive, although the index is still underperforming relative to the Russell 2000.

Options Expiration Spikes Volume Selling as Christmas Approaches

Friday's volume selling spiked on December expiration which will have clouded the intent of the sellers - be it confirmed distribution or mild selling.  With Christmas week next week we can expect trading volume to fall and likely remain low until January.  Buyers were able to recover some of Friday's losses by the close of business for both the S&P and Nasdaq with only the Russell 2000 losing ground. However, no index lost significant ground or broke price support.  Friday's Nasdaq trading intraday range was narrow as technicals remain bullish

One step back, two steps forward

After Monday's disappointing selling, Tuesday and Wednesday saw the return of sufficient buying to negate the bearish taint left over from Monday. The S&P now looks primed to push past last week's swing high peak of 3,712, following the Nasdaq which has already managed to achieve this. The buying in the S&P was less, volume wise, than recent selling, so we are not looking at a significant increase in the amount of buying, probably more the case there is a reluctance from sellers - or at least - longs holding big gains and looking for more, than selling. Technicals remain the same, with 'sell' triggers for the MACD and On-Balance-Volume. 

Disappointing selling pressure

Some pent up buying built over the weekend couldn't be sustained over the course of today and instead markets finished near their lows. It was disappointing finish to the day and a poor start for the week after a positive Friday set up. The Nasdaq gapped higher and did at least hold on to its gap by the close. However, it wasn't enough to stop a 'sell' in the MACD trigger.

S&P successful test of 20-day MA

There wasn't a whole lot to Friday's action, but there were some positives. First of all, the 20-day MA of the S&P successfully tested its 20-day MA on a small doji.  The Nasdaq finished on a bullish harami just above its 20-day MA. While the Russell 2000 finished on an inside day along rising support While the S&P tested its 20-day MA it also experienced 'sell' triggers in the MACD and On-Balance-Volume.

Sellers take control

It has been a while coming, but sellers finally come out of the woodwork. When you have a series of small gains it's easy to get distracted by a large day of selling. We haven't seen a loss of support, so it's hard to say how damaging today's selling really is.  The Nasdaq lost nearly 2% but it's still a few percentage points away from its 20-day MA and breakout support. Today's volume was lighter than yesterday's, so today's selling didn't rank as confirmed distribution but still has the potential to scare. The selling reversed the relative recovery to speculative Small Caps.

Rallies Continue as Markets Enter 95% Percentile Overbought

It's not a foretelling of a crash, but the S&P, Nasdaq and Russell 2000 are in the 95% (99% for the Russell 2000) of price extension history from their respective 200-day MAs; these scenarios have often been followed by substantial declines and in some cases, bear markets, but a rout is not guaranteed.  Today's action of small gains is beneficial to longs and keeps the squeeze on shorts.  The Nasdaq is still underperforming against the Russell 2000 but today's buying keeps the rally ticking along regardless. 

Russell 2000 Breaks Out

Friday belonged to the Russell 2000 ($IWM) as it cleared resistance on higher volume accumulation. It was the index to do most of the work, and is also the index which is the most extended from its 200-day MA.

Small Changes Don't Make Headlines But Breakouts Maintained

Today's action was quietly bullish. The fact none of the indices lost significant ground after pushing breakouts is of greater significance - suggesting few traders are willing to sell. As we approach end-of-year we have the Santa rally to look forward too. In reality, if sellers do make an appearance then we will want to see breakout support hold on a test (should a test occur). The Nasdaq is making up lost ground against the Russell 2000 as other supporting technicals remain net positive. The September high has been breached, neutralizing the outlook for a major top then, but with the index now riding 18.2% above its 200-day MA we now have to consider a new major top count; currently, we are in the 90% historic range of overbought action. 


Show more