Surprise buying?

Yesterday's action was unusual in that the 'bullish' hammers from Friday gave way to selling, but today's action added another layer of surprise by reversing Monday's selling with a fresh round of buying. Taking a step back and removing this noise of the last couple of days and we markets continuing their run off their highs. We are seeing a drop in volume in recent days (in both buying and selling), suggesting we are reaching the end of this particular decline. We just need a few more days like today to firm this swing low up.

The Nasdaq jumped nearly 3.5% as it makes its way back towards its 50-day MA. Technicals are net bearish and were little improved despite today's big price gain.

The S&P has made its way back to where a potential (bearish) head-and-shoulder reversal pattern could emerge. If this proves to be true then we have to see a down day tomorrow - or at least a close below the shoulder line. Technicals are mostly bearish, although stochastics are making a recovery. 

The Russell 2000 finds itself up against resistance with technicals still bearish.  While today offers a natural point for the index to reverse, it doesn't mean it will. One aspect which is bullish is the reversal from the mid-line of stochastics.

So, we have indices at natural reversal points, but this has followed from a surprise period of buying. We will know more tomorrow which side of the trade has won. 

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

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