Sunday, August 29, 2021

Finally, some conviction in the markets

It has taken a few weeks for something desicive to happen in the market, but it looks like Friday delivered on some low key bullish promise with a firm accumulation day.  

Best of the action was reserved for the Russell 2000 ($IWM) as it pushed through its 50-day MA with a solid white candlestick.  Technicals are net bullish with a key relative performance up tick against the Nasdaq and S&P. Small Caps look to be in the ascendancy, so now it's question whether the index can go on to break from its trading range.

The Nasdaq didn't have the same day as the Russell 2000, but it did push above last week's consolidation to mark a continuation breakout. Technicalas are net positive as the Nasdaq outperforms the S&P.

The S&P has been edging higher in a series of narrow range candlesticks.  The index has doubled since the start of Covid but trading volume has been steadily falling over the course of the rally.  Friday was a quiet day for the index on light volume, but this is no bad thing with money cycling into more speculative indices.

With the Russell 2000 leading the Nasdaq, leading the S&P, we have the recipe for a new phase of the rally.  The broader (secular) rally feels long in the tooth for Large Caps, but if the Russell 2000 can clear its trading range it will offer a new avenue for money to flow. 

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.